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2.8 Cases and Problems

Learning on the Web (AACSB)

Lessons in Community Living

Executives consider it an honor to have their company named one of Business Ethics magazine’s “100 Best Corporate Citizens.” Companies are chosen from a group of one thousand, according to how well they serve their stakeholders—owners, employees, customers, and the communities with which they share the social and natural environment. Being in the top one hundred for five years in a row is cause for celebration. Two of the twenty-nine companies that enjoy this distinction are Timberland and the New York Times Company.

The two companies are in very different industries. Timberland designs and manufactures boots and other footwear, apparel, and accessories; the New York Times Company is a media giant, with nineteen newspapers (including the New York Times and the Boston Globe), eight television stations, and more than forty Web sites. Link to the Timberland Web site (http://www.timberland.com/corp/index.jsp?page=csroverview) and the New York Times Company Web site (http://www.nytco.com/social_responsibility/index.html) to learn how each, in its own way, supports the communities with which it shares the social and natural environment. Look specifically for information that will help you answer the following questions:

  1. How does each company assist its community? To what organizations does each donate money? How do employees volunteer their time? What social causes does each support?
  2. How does each company work to protect the natural environment?
  3. Are the community-support efforts of the two companies similar or dissimilar? In what ways do these activities reflect the purposes of each organization?
  4. In your opinion, why do these companies support their communities? What benefits do they derive from being good corporate citizens?

Career Opportunities

Is “WorldCom Ethics Officer” an Oxymoron?

As you found out in this chapter, WorldCom’s massive accounting scandal cost investors billions and threw the company into bankruptcy. More than one hundred employees who either participated in the fraud or passively looked the other way were indicted or fired, including accountant Betty Vinson, CFO Scott Sullivan, and CEO Bernard Ebbers. With the name “WorldCom” indelibly tarnished, the company reclaimed its previous name, “MCI.” It was put on court-imposed probation and ordered to follow the directives of the court. One of those directives called for setting up an ethics office. Nancy Higgins, a corporate attorney and onetime vice president for ethics at Lockheed Martin, was brought in with the title of chief ethics officer.

Higgins’s primary responsibility is to ensure that MCI lives up to new CEO Michael Capellas’s assertion that the company is dedicated to integrity and its employees are committed to high ethical standards. Her tasks are the same as those of most people with the same job title, but she’s under more pressure because MCI can’t afford any more ethical lapses. She oversees the company’s ethics initiatives, including training programs and an ethics hotline. She spends a lot of her time with employees, listening to their concerns and promoting company values.

Higgins is a member of the senior executive team and reports to the CEO and board of directors. She attends all board meetings and provides members with periodic updates on the company’s newly instituted ethics program (including information gleaned from the new ethics hotline).

Answer the following questions:

  1. Would you be comfortable in Higgins’s job? Does the job of ethics officer appeal to you? Why, or why not?
  2. Would you find it worthwhile to work in an ethics office for a few years at some point in your career? Why, or why not?
  3. What qualities would you look for if you were hiring an ethics officer?
  4. What factors will help (or hinder) Higgins’s ability to carry out her mandate to bolster integrity and foster ethical standards?
  5. Would the accounting scandals have occurred at WorldCom if Higgins had been on the job back when Vinson, Sullivan, and Ebbers were still there? Explain your opinion.

Team-Building Skills (AACSB)

What Are the Stakes When You Play with Wal-Mart?

In resolving an ethical dilemma, you have to choose between two or more opposing alternatives, both of which, while acceptable, are important to different groups. Both alternatives may be ethically legitimate, but you can act in the interest of only one group.

This project is designed to help you learn how to analyze and resolve ethical dilemmas in a business context. You’ll work in teams to address three ethical dilemmas involving Wal-Mart, the world’s largest company. Before meeting as a group, every team member should go to the BusinessWeek Web site (http://www.businessweek.com/magazine/content/03_40/b3852001_mz001.htm) and read “Is Wal-Mart Too Powerful?” The article discusses Wal-Mart’s industry dominance and advances arguments for why the company is both admired and criticized.

Your team should then get together to analyze the three dilemmas that follow. Start by reading the overview of the dilemma and any assigned material. Then debate the issues, working to reach a resolution through the five-step process summarized in Figure 2.2 "How to Face an Ethical Dilemma":

  1. Define the problem and collect the relevant facts.
  2. Identify feasible options.
  3. Assess the effect of each option on stakeholders.
  4. Establish criteria for determining the most appropriate action.
  5. Select the best option based on the established criteria.

Finally, prepare a report on your deliberations over each dilemma, making sure that each report contains all the following items:

  • The team’s recommendation for resolving the dilemma
  • An explanation of the team’s recommendation
  • A summary of the information collected for, and the decisions made at, each step of the dilemma-resolution process

Three Ethical Dilemmas

Ethical Dilemma 1: Should Wal-Mart Close a Store because It Unionizes?

Scenario:

In February 2005, Wal-Mart closed a store in Quebec, Canada, after its workers voted to form a union. The decision has ramifications for various stakeholders, including employees, customers, and stockholders. In analyzing and arriving at a resolution to this dilemma, assume that you’re the CEO of Wal-Mart, but ignore the decision already made by the real CEO. Arrive at your own recommendation, which may or may not be the same as that reached by your real-life counterpart.

Before analyzing this dilemma, go to the Washington Post Web site (http://www.washingtonpost.com/wp-dyn/articles/A15832-2005Feb10.html) and read the article “Wal-Mart Chief Defends Closing Unionized Store.”

Ethical Dilemma 2: Should Levi Strauss Go into Business with Wal-Mart?

Scenario:

For years, the words jeans and Levi’s were synonymous. Levi Strauss, the founder of the company that carries his name, invented blue jeans in 1850 for sale to prospectors in the gold fields of California. Company sales peaked at $7 billion in 1996 but then plummeted to $4 billion by 2003. Management has admitted that the company must reverse this downward trend if it hopes to retain the support of its twelve thousand employees, operate its remaining U.S. factories, and continue its tradition of corporate-responsibility initiatives. At this point, Wal-Mart made an attractive offer: Levi Strauss could develop a low-cost brand of jeans for sale at Wal-Mart. The decision, however, isn’t as simple as it may seem: Wal-Mart’s relentless pressure to offer “everyday low prices” can have wide-ranging ramifications for its suppliers’ stakeholders—in this case, Levi Strauss’s shareholders, employees, and customers, as well as the beneficiaries of its various social-responsibility programs. Assume that, as the CEO of Levi Strauss, you have to decide whether to accept Wal-Mart’s offer. Again, ignore any decision already made by your real-life counterpart, and instead work toward an independent recommendation.

Before you analyze this dilemma, go to the Fast Company Web site (http://www.fastcompany.com/magazine/77/walmart.html) and read the article “The Wal-Mart You Don’t Know.”

Ethical Dilemma 3: Should You Welcome Wal-Mart into Your Neighborhood?

Scenario:

In 2002, Wal-Mart announced plans to build forty “supercenters” in California—a section of the country that has traditionally resisted Wal-Mart’s attempts to dot the landscape with big-box stores. Skirmishes soon broke out in California communities between those in favor of welcoming Wal-Mart and those determined to fend off mammoth retail outlets.

You’re a member of the local council of a California city, and you’ll be voting next week on whether to allow Wal-Mart to build in your community. The council’s decision will affect Wal-Mart, as well as many local stakeholders, including residents, small business owners, and employees of community supermarkets and other retail establishments. As usual, ignore any decisions already made by your real-life counterparts.

Before working on this dilemma, go to the USA Today Web site (http://www.usatoday.com/money/industries/retail/2004-03-02-wal-mart_x.htm) and read the article “California Tries to Slam Lid on Big-Boxed Wal-Mart.”

The Global View (AACSB)

Was Nike Responsible for Compensating Honduran Factory Workers?

Honduras is an impoverished country in which 70% of its residents live in poverty. Jobs are scarce, particularly those that pay decent wages along with benefits, such as health care. It is not surprising then that workers at two Honduran factories making products for U.S. companies, including Nike, were extremely upset when their factories closed down and they lost their jobs. Even worse, the owners of the factories refused to pay the 1,800 workers $2 million in severance pay and other benefits due to them by law. Although the factory owners had been paid in full by Nike for the apparel they produced, the workers argued that Nike should be responsible for paying the $2 million in severance that the factory owners had not received.

Nike’s original response was to sympathize with the workers but refuse to pay the workers the severance pay they had not received from the factory owners. This stance did not settle well with student groups around the country who rallied in support of the unpaid workers. In the end Nike gave into pressure from the students and paid $1.5 million to a relief fund for the employees. In addition, the company said it would provide vocational training and health coverage for the unemployed workers.

To learn more about this case, read the following:

Answer the following questions:

  1. Do you think Nike was responsible for compensating the workers in Honduras? Why did it change its stance?
  2. Did the students, universities, and workers themselves have all of the information they needed before becoming involved in the protest? Are their facts accurate?
  3. Should students be activists? Do companies such as Nike ignore them at their own peril?