Chapter

four

Quality ManageMent, ethics,

and corporate social
responsibility

learning objectives

After completing this chapter, you should be able to:

■■ Define the term ethics as it applies in a total quality environment.
■■ Explain how trust can affect quality.
■■ Explain how values can affect quality.
■■ Explain how integrity can affect quality.
■■ Describe the role of responsibility in quality management.
■■ Describe the manager’s role in maintaining an ethical environment.
■■ Describe the organization’s role in maintaining an ethical environment.
■■ Explain how to handle ethical dilemmas in general.
■■ Describe the role of ethics training and codes of conduct in maintaining an ethical environment.
■■ Analyze models for making ethical decisions.
■■ Explain why there is often disparity between beliefs and behavior.
■■ Analyze ethics cases and choose appropriate solutions.
■■ Define the term corporate social responsibility.

Engaging in insider trading, accepting a higher commission for selling an inferior product, accepting gifts from suppliers, and hiring
a friend or relative instead of a more qualified applicant—these are all examples of ethics violations that are common in today’s
workplace. Yet, nearly universal agreement exists that business practices in the modern workplace should be above reproach with
regard to ethical behavior. Few people are willing to defend unethical behavior, and for the most part, business and industry oper-
ate within the scope of acceptable legal and ethical standards. Ethical behavior is particularly important in a total quality setting in
which trust, integrity, and values figure prominently in everyday human interactions.

definition and overview The most common impediment to ethical conduct is simply
of ethics human nature. Human beings tend to behave according to
the principle of perceived personal interest. An unfortunate
Ethics is about doing the right thing within a moral framework. fact of life is that it will often appear that a person’s personal
In other words, it is the practical application of morality. What interests are best served—at least in the short run—by an
is ethical in a given situation is decided by applying the values unethical choice. Factors that contribute to this type of mis-
that comprise the prevailing moral framework. The fundamen- guided perception include greed, impatience, ego, fear, expe-
tal question that arises in any ethical dilemma is this: If I be- dience, ambition, and need.
lieve in a given standard of right and wrong, how should these Driven by greed, a CEO might decide to deliver a large
beliefs guide my actions, behavior, attitude, and decisions? The lot of manufactured goods he knows are defective. Driven by
ever-present challenge, of course, is not just determining what is impatience, a person might push her employees to perform a
right but also following through and doing what is right. job in an unsafe manner that could lead to accidents and in-
juries. Driven by ego, a person might claim credit for superior
Human Factors That Contribute work that was actually performed by someone else. Driven
to Unethical Behavior by fear of retribution, a person who knows his boss is lying
to stockholders might simply ignore the fact and look the
Breaches of ethical conduct are, unfortunately, common in to-
other way. Driven by expedience, a person might cut corners
day’s hectic, hypercompetitive global business environment.
49
50 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

in ways that could lead to tragic results. Driven by misguided pressure, thereby making it less difficult for their personnel
ambition, a person might lie on her resume, adding a degree to behave ethically, or create an environment that increases
she has not completed. Finally, driven by the need to pay the the pressure, thereby almost guaranteeing unethical behav-
mounting hospital bills for his sick child, a person might use ior. Organizational factors that can contribute to unethical
a company credit card for personal expenses. behavior include the following:
In all of these cases, people made unethical choices
■■ Failing to make ethics part of the organization’s core
based on misguided personal interest. Even though one
values. An important component of an organization’s
might, understandably, feel sympathy for the individual who
strategic plan is a statement of core values. Failing to make
was struggling to pay mounting hospital bills, the choice he
high ethical expectations a core value in the strategic plan
made to misuse a company credit card was still an unethical
is tantamount to approving unethical behavior. Silence on
choice. Doing the wrong thing, even for the right reasons, is
ethics sends the wrong message from the top, and it is not
still wrong. Extenuating circumstances do not alter what is
sufficient to claim that “our organization takes ethical be-
right or wrong, just as understanding why a person makes an
havior for granted, so we don’t need to make it part of our
unethical choice does not excuse her for doing so. This leads
strategic plan.”
to an important point relating to human nature and ethics.
When deciding what is right and wrong in a given situ- ■■ Failing to set a consistent positive example. Executives
ation, it is often necessary to separate the choice from the and managers in any organization set the tone for the
extenuating circumstances that impinge on making it. These organization. If management personnel expect ethi-
extenuating circumstances can create what is known as a gray cal behavior, they have to set a consistent example of it.
area around a given choice. By “gray,” the people involved in Employees will follow the actions of management person-
making the choice mean that what is right is neither black nel rather than their words. The words are important, but
nor white. There is a gray area surrounding the decision they must be consistently reinforced by ethical action, de-
that makes it difficult to see through the fog to find the right cisions, and behavior.
thing. There are cases when using the gray area argument is ■■ Putting personnel in ethical “corners.” Management
legitimate—for example, when doing what is right will help personnel who box employees in by forcing them into
one person but hurt many. What is the right thing to do in ethical corners that offer no room to maneuver will al-
such a case? Should the decision makers take a black-and- most surely produce unethical behavior. This can happen,
white approach or apply the principle of the greater good? for example, when the pressure to meet a deadline looms.
This is a legitimate gray area in an ethical dilemma. A manager might say to his team, “I don’t care how you
However, many times when decision makers say they do it, but I want you to meet the deadline.” This manager
are dealing with a gray area when facing an ethical dilemma, has just told his direct reports that even if they have to
what is really happening is that they want to make a choice take unethical shortcuts, they are to meet the deadline.
they know is unethical but for reasons of misguided personal ■■ Failing to adopt, deploy, and enforce a corporate code
interest are trying to find a way to justify it. In such cases, of ethics. If ethical behavior is a core value for an orga-
decision makers often use the extenuating circumstances as nization—as it must be—the organization should adopt,
their justification. This is why it is so important to separate deploy, and enforce a corporate code of ethics that pro-
decisions concerning what is right and wrong from extenu- vides specific guidance for personnel. Even a code of eth-
ating circumstances. The approach that is more likely to lead ics cannot cover every ethical exigency that might arise,
to an ethical choice is to decide what is right in a given situ- but it can provide guidance that is specific enough to be
ation and do it. Then find other ethical ways to deal with the meaningful but generic enough to allow for the applica-
extenuating circumstances. tion of good judgment.
For example, in the case above of the individual who
■■ Applying unrealistic pressure. As the globalization of
misused a company credit card, there were a variety of ethi-
competition continues, organizations are under increas-
cal ways to deal with the extenuating circumstance (hospital
ing pressure to perform at ever higher levels. This is why
bills for a sick child). He could have asked friends, family,
continual improvement is a foundational aspect of quality
colleagues, and charitable organizations for help. In every
management. Competition creates pressure by shorten-
community, there are civic organizations that sponsor fund-
ing deadlines, demanding lower costs, expecting higher
raising events for just such situations. The individual in-
quality, and wanting better service. The pressure on the
volved was in a bind—of this there is no doubt—but he had
leaders of organizations that operate in a competitive en-
options for dealing with his situation other than the unethi-
vironment is intense. When this pressure is passed down
cal choice he made.
throughout the organization in a realistic manner, there
is no problem. But when poor planning on the part of
Organizational Factors That Contribute to management causes pressure to be applied unrealistically,
Unethical Behavior employees are forced to take unethical shortcuts.
Human nature, coupled with the competitive pressure of the ■■ Failing to reward ethical behavior. There is an adage
global marketplace, can make adhering to ethical principles that “No good deed goes unpunished.” Here is just one
a daily challenge. Organizations can either help relieve the example of what this adage can mean in the workplace.
 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 51

An individual in an organization makes an ethical deci- marketplace, greater ability to attract and retain high-value
sion that results in a short-term loss of profits but that is personnel, higher ratings with creditors and investors,
clearly the right thing to do. Rather than being rewarded, differentiation from the competition, and increased sales—
she is punished—not overtly but in subtle ways. For exam- especially to government organizations that insist on an ex-
ple, a quality manager discovers that his company has just cellent record in the area of ethics.
shipped a box of defective parts to a customer. He quickly The so-called costs of ethical business practices are al-
contacts the customer, recalls the defective parts, and re- most always short term in nature, while the benefits tend to
places them with parts that meet all quality standards. be long term. This fact presents organizations with a major
This causes the manufacturing department’s monthly re- challenge. In order to enjoy the benefits of ethical business
port to show a major increase in waste; hence, the com- practices, they may have to occasionally make decisions that
pany suffers a temporary loss of profits. The company’s will cost them in the short run. However, making unethi-
CEO responds by giving the quality manager a bad per- cal decisions to serve some misguided short-term goal often
formance review. This CEO actually punished his quality means there will be no long-term future for an organization.
manager for doing the right thing instead of rewarding
him. By failing to reward ethical behavior, the CEO actu- Guidelines for Determining Ethical Behavior
ally encouraged unethical behavior—a fact that is sure to
cost his company greater losses in the long run than the There are some guidelines that can be used in sorting out
temporary losses incurred by doing the right thing. ethical and unethical behavior. However, before presenting
the guidelines, we must distinguish between the concepts of
legal and ethical: They are not the same thing. Just because a
Cost-Benefit Analysis and Ethics choice made is legal does not necessarily mean it is ethical.
Some argue that it costs too much to take the ethical high A person’s behavior can be well within the prescribed limits
road in today’s hypercompetitive global business environ- of the law and still be unethical. Some tests for determining
ment. Those who make this argument mean that ethical be- ethical behavior shown in Figure 4.1 assume the behavior in
havior can cause their organization to lose contracts by tying question is legal. By applying any one of these tests, a person
up so much energy and so many resources in “doing good” should be able to see through the gray area surrounding an
that it becomes impossible to compete. This is the short- issue and determine the ethical route to take.
term perspective that overlooks the long-term benefits of
ethical business practices.
trust and total Quality
The benefit of avoiding harm is the long-term mainte-
nance of a good reputation. Unethical behavior that results The total quality approach cannot be successfully imple-
in government investigations, lawsuits, and media-driven mented in an organization that fails to subscribe to high stan-
scandals can bankrupt even the largest, most powerful organi- dards of ethical behavior. This is because ethical behavior
zations. Those that are able to survive the investigations, law- builds trust, and trust is an essential ingredient in total quality.
suits, and scandals often lose their reputation, a fact that causes Consider the various elements of total quality that depend on
their stock to plummet, their best employees to jump ship, and trust: communication, interpersonal relations, conflict man-
their customers to take their business elsewhere. How much is agement, problem solving, teamwork, employee involvement
an organization’s good reputation worth? Everything. and empowerment, and customer focus (see Figure 4.2).
Affirmative benefits of ethical business practices in- In human communication, receivers accept messages
clude higher employee morale, a positive reputation in the only from senders they trust. In interpersonal relations, trust

Morning-After Test
How will you feel about this behavior tomorrow morning?

Front-Page Test
How would you like to see this behavior written up on the front page of your
hometown newspaper?

Mirror Test
How will you feel about this behavior when you look in the mirror?

Role Reversal Test

How would you feel about being on the receiving end of this behavior?

Commonsense Test
What does everyday common sense say about this behavior?

FiguRE 4.1 Tests of Ethical Behavior.

52 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

Customer
Focus

Employee
Involvement and
Empowerment

Teamwork

Problem Solving

Conflict
Management

Interpersonal
Relations

Communication

FiguRE 4.2 Elements of Total Quality That Depend on Trust.

is the most fundamental element. People who trust each other to be good trust builders. Although it is important that manag-
will be able to get along and work well together even in the ers be able to establish themselves as trustworthy, that by itself
worst of circumstances. On the other hand, people who do not is not enough. Managers in a total quality setting must also be
trust each other will be unable to get along and work well to- able to build trust in the organization and among its employees.
gether even in the best of circumstances. Trust is also a critical One of the best ways managers can help build trust is to
element in conflict management. A manager must be trusted protect the interests of those who are not present at the mo-
by both sides in a human conflict to help resolve the conflict. ment as if they are. When a manager speaks up for someone
For people to put aside their personal agendas and work who is not present but is being questioned or attacked, em-
together as a team, they must trust each other. If even one ployees get the following two simultaneous messages:
team member is concerned that another team member is
promoting his or her self-interests over those of the team, ■■ Talking behind a colleague’s back is not acceptable
teamwork will not succeed. Managers will not involve and behavior.
empower employees unless they trust them. ■■ If this manager doesn’t let me talk about fellow employees
Ethics plays a critical role in the successful application who are absent, he or she won’t let others talk about me
of total quality. Ethical behavior on the part of the organi- when I’m absent.
zation is just as important as the behavior of managers and
employees. A company that fails to honor warranties, treats Knowing they will be included in any conversation that is
employees poorly, or pollutes its community cannot expect about them or that affects them builds trust among em-
employees to disregard the example it sets and promote a ployees. A sincere apology can also build trust. Managers
trusting environment in the workplace. sometimes make mistakes or do things that hurt employees.
If the trust that results from ethical behavior is so impor- Making excuses, pointing the finger of blame at someone
tant to total quality, then it follows that modern managers need else, or ignoring the situation only exacerbates it. By simply
 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 53

and sincerely saying “This is my fault; I’m sorry,” managers

can build trust even when they have made mistakes. Quality tip
Keeping promises is another way managers can build
trust. Dependability builds trust. It is human nature to want Corporate Values are Not Just for Show—they Must
to be able to depend on what others tell us. Promises in Be Real
the workplace often take the form of deadlines. A deadline A mistake frequently made by organizations is adopting a set of
promised should be a deadline kept. Regardless of the type corporate values that no one really intends to accept or follow.
These values look impressive when displayed on the wall of
of promises made, managers and employees in a total quality
an organization’s lobby and on the organization’s Web site, but
setting should keep them and expect others to do the same. when it comes to informing behavior or guiding decisions they
It is easier to trust people who are dependable, even when are ignored. Adopting corporate values and then ignoring them
we don’t agree with them, than it is to trust someone who is is worse than not adopting them at all. Stakeholders will soon
not dependable. “Be a person of your word” is a good rule of know if the organization’s leadership is serious about its stated
corporate values. A set of corporate values that is adopted and
thumb to follow when trying to build trust.
displayed but ignored soon becomes an indictment against the
In attempting to build trust in the workplace, manag- organization rather than a tool for lifting it up.
ers should take the initiative, even though in a total quality
setting trust building and other tasks necessary for success
in the intensely competitive global marketplace are the re-
sponsibility of everyone. Managers should not sit back and
expect trust building to just happen. Their role is to get It is important for managers in a total quality setting to
things moving and to “stir the pot” as necessary to keep understand that although honesty is fundamental to it, in-
things moving. tegrity is more than just honesty. People with integrity can be
Motivating employees and continually developing their counted on to do the right thing, do things correctly, accom-
job skills are important responsibilities of managers in a plish tasks thoroughly and completely, finish work on time,
total quality setting. Managers who are not trusted will be and keep promises. The same is true of organizations.
ineffective at fulfilling these responsibilities. This is because Managers with integrity will keep the best interests of
employees must trust that they, as well as the organization, their organization and employees in mind when making deci-
will benefit from new skills before they are willing to apply sions and in all other aspects of their jobs. Committing to not
themselves to developing the skills. knowingly harming an employee, a customer, the organiza-
tion, or the public at large forces managers to think about the
consequences of their actions before taking them. This princi-
values and total Quality ple also applies to employees and the organization as a whole.
Values are those deeply held beliefs that form the very core
of who we are. A person’s conscience or internal barometer responsibility and
is based on his or her values. Our values guide our behavior. total Quality
This statement also applies to organizations. An organization
Part of ethical behavior is accepting responsibility. This is
will not produce a quality product or provide a quality service
critical in the modern workplace because employees are
unless the organization values quality. Knowledge and skills
drawn from a society that, as a rule, shuns responsibility—
are important, but by themselves, they do not guarantee re-
which is why ours has become such a litigious society.
sults. This is because individual employees and organizations
People want to blame others for their own shortcomings
as a whole will most willingly apply their knowledge and
and failures. Students graduate from high school unable to
skills to what they value, what they believe in, and what they
read and immediately file lawsuits against the school board
feel is important.
as if they had no part in their own failure. A burglar trips
Ethical behavior begins with values. Values that lead to
on a skateboard after robbing a house, sues the homeowner,
ethical behavior include fairness, dependability, integrity,
and wins! Inmates upset over the quality of food take their
honesty, and truthfulness. These values tend to encourage
guards hostage and burn down an entire wing of the prison,
a work environment that involves, empowers, values, and
saying their rights have been violated. Modern society has
nurtures people: one that not only holds employees respon-
evolved into one that focuses on rights but ignores the re-
sible, but also gives them the support, leeway, and resources
sponsibilities that must accompany those rights.
needed to fulfill their responsibilities.
Passing blame has become commonplace. Employees
often refer to their employer as “they” rather than “we.” Go
integrity and total to a fast-food restaurant or a retail store and complain to a
salesclerk. Chances are good that the salesclerk will pass on
Quality
the blame to an unseen “they.” This is not ethical behavior. In
Another aspect of ethical behavior is integrity. Integrity, as a total quality setting, people are responsible for their actions
a personal and organizational characteristic, combines hon- and accountable for their performance. Accepting responsi-
esty and dependability. When an individual or an organiza- bility helps build trust, integrity, and all the other elements of
tion has integrity, ethical behavior automatically follows. ethics that are so important in a total quality environment.
54 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

Manager’s role in ethics Full-Potential Approach

By applying the information set forth so far in this chapter, With the full-potential approach, decisions made are based
managers can make ethical decisions. Unfortunately, decid- on how they will affect the ability of those involved to achieve
ing what is ethical is much easier than actually doing what is their full potential. The underlying philosophy is that people
ethical. In this regard, trying to practice ethics is like trying are responsible for realizing their full potential within the
to lose weight. It is not so much a matter of knowing you confines of morality. Choices that can achieve this goal with-
should exercise and cut down on eating as it is a matter of out infringing on the rights of others are considered ethical.
following through and actually doing it. The values of the organization and the manager will de-
This fact defines the manager’s and the professional’s termine which approach is used. Which one is best is a phil-
role with regard to ethics in an organization. Managers and osophical question that could be debated at length without
professionals in organizations are responsible for following being resolved and can be discussed only within the context
through and actually exemplifying ethical behavior. They are of a values system.
responsible for establishing high ethical standards, setting a
consistently positive example of exceeding those standards,
and acting immediately when they observe unethical behav- organization’s role in
ior (Figure 4.3). ethics
Organizations have a corporate responsibility for promoting
Best-Ratio Approach and encouraging ethical behavior among their personnel.
The organization’s responsibilities are to: (1) create an ethical
The best-ratio approach is a pragmatic approach based on
environment in which stakeholders know that they will be
the belief that people are basically good, that in the right cir-
supported when making ethical choices and (2) ensure that
cumstances they will behave ethically, and that under cer-
all people in positions of authority in the organization set an
tain conditions they can be driven to unethical behavior.
example of living up to the highest ethical standards.
Therefore, managers should do everything possible to create
conditions that promote ethical behavior and try to maintain
the best possible ratio of good choices to bad choices and Creating an Ethical Environment
ethical behavior to unethical behavior. When hard decisions An organization creates an ethical environment by establish-
must be made, managers should make the choice that will do ing policies and practices that ensure that all employees are
the most good for the most people. This approach is some- treated ethically and then by enforcing those policies. Do
times called situational ethics. employees have the right of due process? Do employees have
access to an objective grievance procedure? Are appropriate
Black-and-White Approach health and safety measures in place to protect employees?
Are employees protected from harassment based on race,
With the black-and-white approach, right is right, wrong is
gender, or other reasons? A company that establishes an en-
wrong, and conditions are irrelevant. The manager’s job is to
vironment that promotes, expects, and rewards ethical be-
make ethical decisions and carry them out. It is also to help
havior can answer “yes” to all of these questions.
employees behave ethically regardless of circumstances. When
One effective way to create an ethical environment is
difficult decisions must be made, managers should make fair
to develop an ethics philosophy with specific guidelines
and impartial choices regardless of the outcome and do the
for putting the philosophy into operation, to put it in
right thing without concern for short-term circumstances.
writing, and to share it with all employees. What follows

Quality tip

an Organization’s Reputation Can Be Destroyed

Overnight
Organizations succeed in the long run by maintaining a reputa-
tion that makes them attractive to customers. Customers do not
want to be associated with an organization that has a dark cloud
hanging over it. Consequently, it is critical that executives, man-
agers, and professionals understand that their organization’s
reputation can be destroyed overnight by unethical behavior.
Financial irregularities, trashing the environment, personal in-
discretions, inappropriate acts, irresponsible decisions, and
mishandled responses to crises can quickly turn a market-leading
organization into a mediocre or even failing organization.
FiguRE 4.3 Three “Musts” of Managers.
 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 55

is a sample corporate ethics statement that could be used Setting an Example

by any organization as a first step in creating an ethical
environment. Organizations that take the “Do as I say, not as I do” approach
At ABC Inc., all personnel are expected to uphold the to ethics will not succeed. Employees must be able to trust their
highest ethical standards. As we interact with each other and employers to conduct all external and internal dealings in an
with the customers, suppliers, and the general public, we will ethical manner. Companies that do not pay their bills on time,
be guided by the following principles: companies that pollute, companies that fail to live up to adver-
tised quality standards or stand behind their guarantees, and
■■ We will be honest and tell the truth in all situations. companies that are not good neighbors in their communities
■■ We will fulfill all promises we make. fail to set a good ethical example. Such companies can expect
■■ We will be fair and impartial in dealing with others. employees to mimic their unethical behavior. Finally, in addi-
tion to creating an ethical internal environment and handling
■■ We will be selfless in dealing with others, putting the
external dealings in an ethical manner, organizations must
team’s needs before our own.
support managers who make ethically correct decisions—not
■■ We will accept responsibility and accountability for our just when such decisions are profitable but in all cases.
actions, decisions, and behavior.
■■ We will endeavor to earn and maintain the trust of each
other, customers, suppliers, and the general public. handling ethical dileMMas
■■ We will refuse to rationalize unethical behavior. Every manager will eventually confront an ethical dilemma.
■■ We will obey all applicable laws, regulations, and rules— When this happens, the manager’s response is very impor-
federal, state, local, and organizational. tant. Figure 4.4 provides guidelines that managers can use in
such situations.
A statement such as this sets the tone for all personnel in
an organization. It lets them know that upper management
not only supports ethical behavior, but also expects it. This
ethics training and codes
approach makes it less difficult for managers when they find
themselves caught in the middle between the pressures of
of business conduct
business and the maintenance of ethical behavior in their Ethical behavior and the rationale for it can be taught. In
departments. fact, almost 40% of the organizations in the United States
Beliefs such as those in the preceding sample ethics with 100 or more employees provide ethics training. A sur-
statement tell employees that they have obligations that ex- vey by the Ethics Resource Center in Washington, DC, re-
tend beyond the workplace and that how they perform their vealed that “28 percent of the 711 responding companies
work can have an impact, negative or positive, on fellow em- provide specific training on ethics.”1
ployees and on their organization, customers, and country. The Ethics Resource Center has identified the following
Key concepts set forth in these statements are honesty, in- as topics that are widely addressed in corporate-sponsored
tegrity, truth, and fairness. Managers who stress, promote, ethics training programs:2
and model these concepts will make a major contribution to
■■ Drug and alcohol abuse
ethical behavior in the workplace.
Written philosophies and guidelines such as those ■■ Employee theft
developed by Wisconsin Public Service Corporation are the ■■ Conflicts of interest
first step in creating an ethical environment in the work- ■■ Quality control
place. Managers can play a key role in promoting ethical
■■ Misuse of proprietary information
behavior on the job by encouraging upper management to
develop written ethics philosophies, credos, or guidelines ■■ Abuse of expense accounts
and then by modeling the behavior they encourage. ■■ Plant closings and layoffs

Before taking any action in situations involving ethical dilemmas, answer the
following questions:

• What solution is most likely to build trust among those involved?

• What solution fits best into the company’s value system?
• What solution will pass the morning-after, front-page, mirror, role reversal, and
commonsense tests?
• What solution is most likely to enhance the organization’s integrity?
• What solution is the most responsible option?

FiguRE 4.4 Guidelines for Handling Ethical Dilemmas.

56 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

■■ Misuse of company property ample opportunities to state their views, ask questions,
■■ Environmental pollution and propose solutions.
■■ Methods of gathering competitors’ information ■■ Make the training practical. People need to see how
the training applies specifically to them. An effective ap-
■■ Inaccuracy of books and records
proach for ensuring that training is practical is to pres-
■■ Receiving excessive gifts and entertainment ent real-life scenarios and ask participants to explain how
■■ False or misleading advertising they would handle each situation and why. It is also im-
■■ Giving excessive gifts and entertainment portant to ask how the organization could help them do
the right thing in each case.
■■ Kickbacks
■■ Avoid dogmatic statements. People are typically turned
■■ Insider trading
off by dogma. Rather, it is better to present and discuss
■■ Relations with local communities ethical principles and then allow participants to decide
■■ Antitrust issues how they apply. The trainer’s role is to tactfully guide
■■ Bribery participants toward an ethical solution by helping them
take their opinions to their logical conclusion. Rather
■■ Political contributions and activities
than telling participants that an idea or opinion is wrong
■■ Improper relations with local government representatives or right, it is better to lead them in such a way that they
■■ Improper relations with federal government representatives come to that conclusion themselves.
■■ Inaccurate time charging to government
■■ Improper relations with foreign government officials Models for Making ethical
■■ Making exaggerated advertising claims decisions
Ethics as a concept exists within a framework defined by
Codes of Business Conduct organizational values. Just as the values of organizations
Ethics training should not take place in a vacuum, nor can differ, so can the decision-making models used for de-
should it be nothing more than a list of “thou shalt nots.” termining the ethical course of action in a given situation.
Rather, organizations should develop codes of business con- This section briefly describes several such models that can
duct written from a positive perspective that encourage em- be used for making ethical decisions. The actual model cho-
ployees to do the right thing. Figure 4.5 is an example of one sen will depend on the values of the organization and of the
organization’s code of business conduct. larger community in which the organization does business.
Ethics training is becoming increasingly important as In a total quality organization, all stakeholders—
the pressures of succeeding in an intensely competitive global external and internal—have a say in establishing and judging
marketplace grow. Professionals operating in the hypercom- the corporate values. Consequently, it is important to select
petitive environment that is today’s global marketplace will a model that will withstand the scrutiny of all stakeholders.
frequently face ethical dilemmas. This may be why such Having done so, an organization should stick with its model
ethics-related problems as kickbacks, bribes, insider trading, and apply it consistently. The most widely used models are
tax evasion, fraud, environmental violations, sexual harass- as follows:
ment, and discrimination seem to be so common in today’s ■■ Categorical imperative model. The categorical impera-
workplace. As a result, when providing ethics training, it is tive model is also known as the black-and-white model.
so important to observe the following rules of thumb: With this model, right is right, wrong is wrong, and there
■■ Encourage two-way communication. “Broadcasting” to are no gray areas.
people about rules, regulations, and policies is ineffective ■■ Full-disclosure model. With this model, the func-
as a training strategy. Rather, it is important to encourage tional criterion is a simple question: Could the organi-
open, frank, informed discussion and give participants zation explain its actions to the satisfaction of a broad

Code of Business Conduct

INTERNATIONAL SERVICE CORPORATION

The owners and management of International Service Corporation (ISC) are committed to the
highest ethical standards in the conduct of the company’s business. All employees at all levels
are expected to conduct their dealings with customers, suppliers, colleagues, and each other with
honesty and integrity. At ISC, the ethical way is the right way. When making decisions, ISC
personnel will endeavor to achieve fairness to all stakeholders. Our reputation is our most
important strategic advantage in the global marketplace.

FiguRE 4.5 Example of a Company’s Code of Business Conduct.

 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 57

cross-section of stakeholders? Only when this question beliefs versus behavior:

can be answered in the affirmative is an action considered why the disparity?
ethical. This model has the advantage of applying the val-
ues of stakeholders in deciding what is ethical. Ethics in the workplace manifests itself through the ap-
plication of such values as honesty, loyalty, fairness, caring,
■■ Doctrine of the mean model. In this model, the mean respect, tolerance, and duty. Most, but not all, people in the
refers to the average or middle point between two ex- workplace subscribe to these values. Why, then, is there so
tremes. Translated for practical application, this model often a gap between what people believe and what they do? In
suggests that in any situation, a moderate middle-ground other words, if people believe in honesty, why are they some-
option is likely to be an ethical option. Said another way, times dishonest? If people believe in fairness, why are they
this model suggests that moderation is ethical. sometimes unfair? These are questions that could be debated
■■ Golden Rule model. This model is based on the Golden at length in a broad philosophical context. However, several
Rule: “Do unto others as you would have them do unto reasons explain the disparity, at least on a practical level.
you.” It is one of the most popular models in Western
society. Like the full-disclosure model, it takes the view- Self-Interest and Self-Protection
points of stakeholders into account in deciding what is
ethical. People are, by their very nature, self-interested and, as a re-
sult, self-protective. The driving force behind such slogans
■■ Market-ethic model. This model is based on the belief as “Me First” and “Looking Out for Number One” is a self-
that any legal action that promotes profitability is ethi- centered attitude. Most people work against human nature
cal. Proponents of this model profess that the purpose to put someone else’s needs ahead of their own. Yet, this is
of a business is to make a profit. Consequently, what is precisely what one must do to deal ethically with fellow em-
ethical should be decided within a framework of profit ployees and the public at large.
and loss. They argue that in the long run the market will Being honest sometimes means putting yourself at a dis-
reject unethical corporate behavior, making it thereby advantage or having to admit something you would rather
unprofitable. not. In such situations, the natural instinct for self-protection
■■ Organizational ethic model. This model is based on takes over and the inclination is to evade the truth. Consider
loyalty to the organization. Its underlying premise is that the example of John.
the most ethical decision is the one that best serves the or- John had some minor repair work to do on his truck but
ganization’s interests. Unless an organization has adopted didn’t have a certain tool he needed. Consequently, at the end
a set of guiding principles that ensure ethical behavior, of his shift at Autoworld Inc., he borrowed the needed tool
the organizational ethic model is difficult to defend. from the company’s tool locker. That night he completed the
■■ Equal freedom model. The underlying principle of this work on his truck, but the next morning he forgot about the
model is that organizations have the freedom to behave tool and left it at home. By the time he remembered the tool,
as they wish unless their actions infringe on the rights it was too late to go back home without missing the begin-
of stakeholders. This is a more confining model than it ning of his shift. John drove on to work hoping that the tool
might appear at first glance. For example, suppose an or- wouldn’t be needed that day. If nobody needed it, the tool
ganization decides to use a new chemical that improves wouldn’t be missed and he could return it the next day.
product quality and costs substantially less than the one Everything went well until midmorning when a job
it will replace. Before making a decision, the organization came in requiring the missing tool. When it wasn’t in its
learns that the community’s current water safety tech- place in the tool locker, the shift supervisor began asking
nology may not be able to screen out the chemical. The around to determine who was using it or who had used it
worst-case scenario is that it could contaminate the local last. Finally, when a thorough search of the shop failed to
water supply. Applying the equal freedom model, adopt- produce it, the supervisor asked if anyone had borrowed it.
ing the new chemical would be unethical because it might John knew that Autoworld had a strict policy against just
violate the rights of stakeholders (everyone who depends this sort of thing. He also knew that if he didn’t speak up, the
on the local water supply). last person to have used the tool would be required to pay for
it. That was the rule. Unfortunately, if he did admit having
■■ Proportionality ethic model. This model is based on borrowed the tool, he would be reprimanded and fined, even
the assumption that the world is so complex that deci- if he returned it. John did not want to see a colleague forced
sions are seldom clearly right or wrong. Consequently, to pay for his mistake. But, on the other hand, he had already
the best an organization can do is to make sure that the been reprimanded and fined once this month. He certainly
good outweighs the bad when making decisions. didn’t want to go through that again. John faced a common
■■ Professional ethic model. This model is based on the dilemma: tell the truth and bear the consequences, or give in
principle of peer review. It states that a decision is ethical to his natural instinct for self-protection. Faced with such a
if it can be explained to the approval of a broad cross- dilemma, people will go one way or the other, depending on
section of professional peers. Professions that subscribe which factor—conscience or self-protection—has the stron-
to this model typically adopt a professional code of ethics. gest pull on them at the time.
58 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

It is not uncommon for self-interest or self-protection to downside is that at some point in the future the company
win out under the pressure of the moment, only to have the will lose the trust and, as a likely result, the future business
conscience take over once there has been time for quiet re- of the contractor she deceived. The benefit in this situation is
flection. This is why stories abound about thieves who later immediate; the downside is deferred.
return the money or successful people who make a large
financial contribution to assuage their guilt over an earlier
transgression.
Making Ethics Tangible and Immediate
Because the benefits of ethical behavior can be perceived as
Conflicting Values being intangible and deferred, people will sometimes choose
the unethical option—even people who believe in ethical
People who believe in ethical values (honesty, loyalty, fair- values. The challenge to the management is to help employ-
ness, etc.) sometimes find themselves in situations where ees see that the benefits of ethical behavior are tangible and
these values seem to conflict. For example, consider the that even when deferred they still accrue.
dilemma faced by Mary Ann, a sales representative for Periodic focus groups conducted by an outside facili-
Construction Products Inc. (CPI). tator in which employees discuss ethics-related issues can
CPI is having a bad year and desperately needs every be an effective way to make ethics tangible. During these
contract it can get. Mary Ann has an opportunity to win a meetings, employees discuss very specific situations that in-
contract to supply all the kitchen cabinets for a 56-house clude ethical dilemmas. The facilitator asks questions, such
subdivision that is going to be built in the near future. But as “What would you do in this situation? Why? What is the
there is a problem: CPI cannot deliver the cabinets by the right thing to do? What would keep you from doing the right
required date. Failure to deliver on time will throw off the thing? What are the consequences of choosing an unethical
customer’s entire production schedule. Mary Ann’s boss is option?” Group members discuss the issue and respond to
pressuring her to agree to the delivery date, even though the facilitator’s questions. The facilitator’s job is to guide the
they both know that the deadline cannot be met. Mary Ann discussion toward the tangible and immediate consequences
wants to give an honest reply with a more realistic delivery of unethical behavior, or, put another way, the tangible and
date, but she is in a quandary over what to do. immediate benefits of ethical behavior.
This morning her boss took her aside and said, “You are Sometime during the meeting, the facilitator will ask the
so worried about honesty that you’ve forgotten about loyalty. following types of questions and lead participants through
What about loyalty to this company and your friends who discussion and debate:
work here? If we don’t bring in some work soon, we are all
going to be out looking for jobs!” ■■ How does the management reward ethical behavior?
Honesty versus loyalty—what does one do when ethical ■■ How does the management unknowingly promote un-
values seem to conflict? People obviously choose one over ethical behavior?
the other based on their interpretation of the situation, the ■■ Does the management unknowingly reward unethical
facts as they know them, and contributing personal influ- behavior?
ences. However, rather than asking what to do when ethical
values seem to conflict, it might be better to ask whether the Discussing these questions will sometimes reveal that the
values do in fact truly conflict. management expects ethical behavior but does not reward
What kind of loyalty would require one to be dishonest, it or, worse yet, unknowingly rewards unethical behavior.
unfair, or disrespectful? Although ethical values sometimes For example, is ethical behavior a part of the performance
appear to be in conflict, a closer look will usually reveal a evaluation process? Does the management publish ethics
different story. For example, the loyalty issue in Mary Ann’s guidelines and reward employees who follow them? Is the
case was false loyalty. True loyalty would rarely, if ever, re- management’s commitment to ethical values real or just lip
quire dishonesty. service? For example, in the earlier case of Mary Ann, would
the upper management have supported the supervisor or
Mary Ann?
Tangible or Intangible, Immediate or
Deferred
ethical dileMMas: cases
People frequently make decisions that run counter to their
beliefs because the benefits of ethical decisions are often in- This section contains ethical dilemmas that are representative
tangible or deferred. Put another way, the consequences of of those faced by managers every day in the world of business.
unethical behavior are often intangible or deferred, while the While studying these dilemmas, the reader is encouraged to
perceived benefits are usually both tangible and immediate. consider the various factors such as pressure from superiors
Take the case of Mary Ann previously described. If she or peers, personal interest, ambition, financial need, job secu-
is willing to deceive the contractor by submitting a false rity, and others that tend to promote unethical behavior on the
delivery date, there will be a direct benefit that is both im- part of the people who are normally honest and trustworthy.
mediate and tangible. Her company will win a badly needed While reading these cases, ask yourself, “What would I do in
contract, and she will be the author of the victory. The the same situation if I were facing the same pressures?”
 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 59

Let’s consider some examples. Certain models of sport “straight” with her. She was fond of saying, “I can accept mis-
utility vehicles manufactured by Ford begin to show a pat- takes. They happen. I can even overlook an occasional bad
tern of high-speed accidents. The similarity in these acci- day. But I will not put up with lying.” Close friends knew that
dents leads investigators to suspect tire defects. Ford quickly Carlson’s distaste for lying grew out of an unhappy marriage
points to its supplier, Firestone. Firestone defends itself and she had endured for years with a husband who lied to her as
points back at Ford. Union Carbide establishes a process- a matter of course. When she could take her husband’s dis-
ing plant in Bhopal, India, where the laws protecting the honesty no more, Carlson had filed for divorce.
safety of employees and the environment are less rigid than Her commitment to honesty is why Carlson now feels,
those in the United States. The processes at Union Carbide’s as she quietly admits to herself, “lower than a snake in the
Bhopal plant involve the use of extremely toxic chemicals grass.” What makes things even worse is that this is a day on
and gases. When various emergency protection systems ei- which Carlson should be overjoyed. After 15 years of loyal
ther are not working or fail, more than 40 tons of lethal gas and effective service to CEC, several of which were spent as
are released into the atmosphere, killing more than 3,000 the only female engineer in the company, Carlson has just
people. been promoted to director of the civil engineering depart-
Most of the discussion surrounding the Ford–Firestone ment. Her promotion means a substantial salary increase,
and Union Carbide cases focused on litigation and who and Carlson needs it. Her daughter has just started college at
would eventually be held responsible for financial damages. a private institution. It is an excellent school, but the tuition
However, very little attention was paid to the ethical ques- rate is sky high, and her ex-husband, true to form, has re-
tions involved. Did these multinational corporations behave fused to help. Why, then, on this day of all days does Carlson
in ways that were fair to all stakeholders? Should companies feel so bad? The answer is simple: She got the promotion be-
locate plants in developing nations to take advantage of less cause she lied.
restrictive safety and environmental protection laws than The process for selecting CEC’s new director of civil
those in the United States? Should the company that actually engineering had been difficult. The competition had been
sells the product to the consumer pass along responsibility to especially tough. One of Carlson’s long time colleagues and
its supplier or accept responsibility itself? friends had also been a leading candidate. Since Carlson and
The Ford–Firestone and Union Carbide cases received a her friend were equally qualified and equally experienced,
great deal of media attention worldwide. However, these “big the ultimate selection had come down to solving a complex
name” cases represent just a few of the thousands of similar engineering problem developed by the outgoing director,
situations that arise in the corporate world every year. From who was retiring.
small “mom-and-pop” operations to large multinationals, A couple of days before the candidates were scheduled
dealing with ethical dilemmas is an everyday part of doing to take the promotion test, Carlson had gone to the direc-
business. In order to succeed in the long term, managers tor’s office to return a file she had borrowed. The problem
must know how to deal with these dilemmas, and they must she would have to solve on the promotion test was on the
understand that just knowing what is right is not enough. director’s desk. The director was out of the office for the day.
Most people who commit ethical violations know what is Carlson saw the problem and knew immediately what it was.
morally correct. She started to turn away but felt herself drawn to it. Almost
Typically, people intuitively know the difference be- without realizing what she was doing, Carlson leaned over
tween right and wrong. Since this is the case, why, then, the director’s desk and looked at the solution. It was a really
do basically “good” people still sometimes behave un- tough problem.
ethically? This is a valid question and one that has been When the two candidates had completed the test,
debated and discussed by philosophers for thousands of Carlson’s friend and colleague asked how she had done. “I
years. After all, if we know what is right, will we not do think I solved it” was her response. “Not me,” said her friend.
what is right? The answer to this question, unfortunately, “That was the trickiest engineering problem I’ve ever seen.
is “not always.” Even people who have a strong sense of I’ve heard that the director had this really complicated prob-
right and wrong can be pressured to behave unethically. lem that no one has ever been able to solve, except him,
This is because an individual’s sense of right and wrong of course. I don’t suppose you had ever seen this problem
can sometimes be overpowered by a stronger sense of am- before, had you?” Janice Carlson could not look her friend
bition, need, fear of the consequences of making the ethi- in the eye when she said, “No. I’ve heard about it, too. But
cal choice, peer pressure, pressure from superiors, and nu- that was the first time I had ever seen it. I guess I just got
merous other human factors. lucky.” Her friend had smiled and held out his hand, say-
ing, “Anyway, congratulations. It looks like you get the
promotion.”
Case 1: “I Need This Promotion” Carlson is a person who prides herself on honesty, but
Janice Carlson had always seen herself as an ethical person. in this case, her personal interest overcame her commitment
She took pride in always telling the truth, even when doing to the truth. On the one hand, she needs the promotion in
so was uncomfortable. She also insisted that those she su- order to help pay her daughter’s college costs. On the other
pervised at Comstock Engineering Company (CEC) do the hand, the way she received it was dishonest. Put yourself in
same. Carlson frequently admonished her employees to be Carlson’s shoes. What would you have done?
60 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

Case 2: To Pay or Not to Pay? Case 3: The Product Is Inferior,

That Is the Question but the Profits Are Good
John Hingas didn’t know what to do, but he did know that he The executive management team of Athletic Footwear Inc.
would have to make a recommendation, and soon. He had (AFI) faces both a threat and an opportunity. The threat is
been the leading marketing representative for Government that unless it can find a buyer for a large production run of
Products Inc. (GPI) for years. In fact, he was practically a leg- soccer shoes, the company is going to lose a lot of money.
end in the company. That’s why GPI’s president had given him The opportunity is that the vice president of marketing has
the current assignment to “break into the Mexican market.” found a buyer. The problem is that although this batch of
GPI produces various office products ranging from desks and shoes is the company’s best-selling, most popular model, the
chairs to filing cabinets and shelves. The company’s major cus- shoes are defective.
tomers are local, state, and federal government organizations. Several months earlier, AFI’s management team had de-
With the passage of the North American Free Trade cided to save on production costs by using a different glue
Agreement (NAFTA), GPI’s executives had decided to ex- provided by a new supplier. The glue came highly recom-
pand into Mexico. Unfortunately, they were getting nowhere. mended, and it was much less expensive than that previously
After nine months of concerted effort, GPI had nothing to used. Consequently, AFI’s management team had jumped
show for its attempts to gain a foothold in Mexican markets at the opportunity to save money without first running in-
except a stack of invoices for airline tickets, motel rooms, and house tests on the glue. Much to their dismay, the new glue
restaurants. Finally, GPI’s executives decided to send in the turned out to be inferior to that normally used when secur-
“A Team.” That is when John Hingas received the call. While ing the sole of the shoe. Now, the company is stuck with a
meeting with GPI’s executive management team, Hingas warehouse full of defective shoes.
quickly showed why he had always been so effective. After Normally, the company would simply write off the de-
analyzing the company’s marketing plan for Mexico, Hingas fective shoes and absorb the loss. However, the company
told the executives, “I have just one question. How many of has just gone through a year-long battle to stave off a hostile
the marketing representatives we send to Mexico actually takeover. As a result, its coffers are practically empty and its
speak Spanish?” There was an embarrassed silence before debt has nearly doubled. Nobody seated around the table in
Hingas said, “Why don’t we step back from the Mexico ini- the executive conference room is in a mood to just absorb
tiative for a while and give me a chance to look into it? I’ll the potential loss they face. Legal action against the supplier
then come back with recommendations.” has already been ruled out for fear of permanently damag-
“How long do you need?” asked the company’s CEO. ing the company’s image and credibility. Nobody wants the
“Six months,” said Hingas. company’s regular customers to know that a defective batch
“Why so long?” of shoes was produced. Management doesn’t want customers
“Because before I go down to Mexico to look into things, thinking, “If AFI produces one large batch of defective shoes,
I need to learn to speak the language.” maybe it will produce another.”
Eight months and many trips to Mexico later, Hingas The potential buyer is a distributor that has retail outlets
knew exactly what would be necessary to succeed in the throughout South America. This company is even willing to
Mexican markets. By learning to speak Spanish and by get- pay more than the market price for the shoes in order to be the
ting to know a number of key contact people, Hingas had first distributor in South America to carry the AFI brand. No
learned precisely what GPI would have to do in order to sport in South America is more favored than soccer, and the
compete in its targeted market in Mexico. In a word, the an- AFI soccer shoe is very popular in the United States, Canada,
swer was “bribery.” GPI could make the best products in the and Europe. The shoe has a reputation for being comfortable
world at the most reasonable prices, but unless its marketing and durable. It lasts a long time in even the most demand-
representatives became adept at playing the bribery game, ing conditions. But the defective batch in question won’t; in
the company would never sell one piece of furniture to a fact, based on initial trial runs, the soles will probably begin
government organization in Mexico. GPI’s competitors had to separate after less than 20 hours of use. What should AFI’s
already figured this out and were using it to their advantage. executives do? Should they sell the shoes, knowing they are
Hingas knew GPI could “play the game” as well as or defective, or destroy them and find a way to take a loss they
even better than its competitors, but should it? On the one really don’t need at this point in the company’s history? If you
hand, bribery is simply a way of life, a part of the culture in were an AFI executive, what would you suggest?
the markets GPI is trying to reach. The hard truth is clear
to Hingas: no bribes, no contracts. However, with just a few
well-placed bribes, GPI could increase its annual sales by
Case 4: Should He Keep Accurate Records
more than 15% in less than two years. On the other hand, or Fudge on the Facts
GPI enjoys a well-deserved reputation for integrity with its In an attempt to improve quality, the shop superintendent at
customers, and nobody in the company wants to damage FWM Inc. has instructed all work cell supervisors to keep re-
that reputation. Hingas has a recommendation to make, and cords of waste, scrap, and rework items. These records will be
he will have to make it soon. Put yourself in his place. What reviewed periodically at irregular intervals to identify which
would you recommend? work cells are performing best and to make adjustments as
 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 61

necessary. The superintendent has stressed that the records his closest supporters—including Sharon Beckford—to raise
will be used for making continual improvements to machin- more money for him and to do it fast. The problem is that
ing processes and to the performance of individual machin- she and ABC Inc. have already given all the law allows. Jones
ists. But John Simpson, supervisor of Work Cells B and C, wants Beckford to twist the arms of ABC’s employees to con-
is concerned. He was passed over for a promotion that last tribute to a special fund she will collect and pass on to him as if
time he was eligible because his work cells were at the bot- the money came from legitimate individual donations without
tom of the company’s performance ratings. any coercion. Although this is commonly done, it is of ques-
John Simpson is a new father of a child suffering from tionable legality and is at the very least unethical. Beckford
a rare and debilitating disease that requires the baby to have does not want to see ABC forced to lay off good employees—
constant medical attention. Most of the medical costs are especially during a time of high unemployment—but she is
covered by FWM’s health insurance policy. Consequently, reluctant to bend federal election laws. What do you think
Simpson needs to keep his job badly. He cannot risk los- Beckford should do? How would you handle this situation?
ing his job and, in turn, his health insurance because his
work cells fail to measure up to company quality standards.
Simpson’s problem is complicated by the fact that his Work
corporate social
Cells B and C have the least experienced machinists in the responsibility defined
company. He knows how competitive the machining busi- The material presented so far in this chapter has dealt pri-
ness has become. FWM needs the absolute best work from marily with the behavior of individuals in organizations and
its machinists—no waste, no scrap, and no rework—so the the ethical ramifications of that behavior. This section deals
pressure to perform is intense. with the issue of corporate behavior and its attendant ethical
Simpson is considering doctoring his waste, scrap, and ramifications.
rework records to make things look better. He knows this is Business scandals tend to undermine the credibility of
only a temporary tactic. The truth will eventually come out. businesses in general by eroding public trust and confidence.
But he hopes before that happens he will be able to improve In an attempt to stem the tide of unethical behavior in busi-
the performance of his machining teams to acceptable, com- ness, the International Organization for Standardization
petitive levels. What do you think Simpson should do? If you (ISO)—the same organization that developed the interna-
were a friend, what advice would you give Simpson? tional quality management guidelines known as ISO 9000
and the international environmental management guidelines
Case 5: Questionable Political Contributions known as ISO 14000—has taken on the issue of corporate
social responsibility (CSR). The ISO defines CSR as follows:
ABC Inc. is a defense contractor that renovates and retrofits
military aircraft. The company has been in business for more [CSR is] a balanced approach for organizations to address
than 50 years and has an excellent performance record. ABC economic, social and environmental issues in a way that
has kept airplanes modernized for the Navy and Air Force for aims to benefit people, communities and society.3
all this time and is well respected in government contract- Key elements of CSR include the ethical aspects of the
ing circles. Usually maintaining a steady flow of government following business and workplace issues:
contracts is not a problem. But recently, with ongoing budget
cuts to the military the work has slowed down and getting 1. Human rights
new contracts has become an intensely competitive challenge. 2. Occupational safety and health
Sharon Beckford is ABC’s chief contracting officer. She 3. Business practices (fair or unfair)
is the principal interface between the government and ABC. 4. Governance
One of the reasons Beckford has been so effective at bring-
ing in new contracts over the years is her friendship with and 5. Environmental management
family connection to Congressman Mack Jones, chairman of 6. Consumer relations
the Military Appropriations Committee. A word or nod from 7. Marketplace activities
Jones to one of the military chiefs of staff is all it takes to ensure 8. Community involvement
that ABC gets a new contract whenever one becomes available.
But a problem has arisen that could threaten ABC’s future: 9. Social development
Congressman Jones has strong opposition in the upcoming The CSR is critical because the credibility and, in turn, suc-
Congressional elections and his continuance in Congress is cess of a free-market economic system rest on a founda-
anything but a sure bet. If Jones loses, ABC will also lose. tion of trust. All the principles of total quality—continual
Congressman Jones’ reelection is of paramount impor- improvement, competition, strategic management, and
tance to Beckford and her company, a fact that has presented so on—are inextricably linked with free-market practices.
Beckford with an ethical dilemma. The other political party Undermine that foundation of the free-market system and
has targeted Jones’ seat and, as a result, is pouring money into you undermine the entire system. When public trust is un-
trying to elect his opponent. Jones badly needs more cam- dermined, it is replaced by fear, suspicion, and protectionist
paign contributions to buy television and radio ads, but his attitudes. Businesses cannot survive and thrive in such an
campaign fund is quickly running out. He has asked all of environment.
62 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility

suMMary this model and is it a valid premise? For example, with the
categorical imperative model, the underlying premise is that
1. Ethics is about doing the right thing within a moral framework. right is right and wrong is wrong and that there are no gray
The most common impediment to ethical conduct is human areas.
nature, because people tend to behave according to perceived 11. People who believe in ethical values will sometimes make un-
personal interest. ethical decisions because of self-interest, self-protection, or
2. Trust is a critical element of ethics, which, in turn, makes eth- conflicting values or because they see the benefits as being in-
ics critical in total quality. Many of the fundamental elements tangible or deferred.
of total quality, including communication, interpersonal rela- 12. There is often disparity between what people profess to believe
tions, conflict management, problem solving, teamwork, em- and what they actually do. The principle reasons for this dispar-
ployee involvement and empowerment, and customer focus, ity are self-interest, self-protection, conflicting values, and the
depend on trust and ethical behavior. Trust can be built by nature of the benefits in question (tangible or intangible, imme-
being loyal to those not present, keeping promises, and sin- diate or deferred). These factors are often at play when people
cerely apologizing when necessary. take actions that violate their basic beliefs.
3. Values are those core beliefs that guide our behavior. 13. Key elements of corporate social responsibility include the eth-
Individuals and organizations apply their knowledge and ical aspects of the following issues: human rights, occupational
skills most willingly to efforts in which they believe. Managers safety and health, business practices, governance, environmen-
should work to establish an environment in which values that tal management, consumer relations, marketplace activities,
lead to ethical behavior and values that lead to peak perfor- community involvement, and social development.
mance are the same.
4. Integrity requires honesty, but it is more than just honesty.
key terMs and concepts
Integrity is a combination of honesty and dependability. People
with integrity can be counted on to do the right thing, do it
Best-ratio approach
correctly, and do it on time.
Black-and-white approach
5. Accepting responsibility is part of ethical behavior. People Conflicting values
who pass blame are not behaving ethically. In a total quality Corporate social responsibility
setting, people are responsible for their performance. When Ethical dilemma
speaking of their organization, ethical people say “we” in- Ethics
stead of “they.” Full-potential approach
6. Managers play a key role in ethics in an organization. They are Gray area
responsible for setting an example of ethical behavior, helping Integrity
employees make ethical choices, and helping employees follow Morality
through and behave ethically after making an ethical choice. In Morning-after test
carrying out these responsibilities, managers can use the best- Perceived personal interest
ratio approach, black-and-white approach, or full-potential Responsibility
approach. Trust
7. The organization’s role in fostering ethical behavior includes Values
creating an ethical environment and setting an ethical exam-
ple. Key in creating an ethical environment is having a com-
factual review Questions
prehensive ethics policy. Key in setting an example is following
the policy, expecting all employees to follow the policy, and
1. Define the term ethics.
rewarding those who do.
2. What is morality?
8. In handling ethical dilemmas, managers should select the op-
tion that is most likely to build trust, integrity, and a sense of 3. Explain how a certain behavior could be legal but not ethical.
responsibility and that is most likely to pass the various ethics 4. What role does trust play in a total quality setting?
tests (front-page, morning-after, etc.). 5. Describe how managers can build trust.
9. Ethics training and codes of business conduct can be used 6. What role do values play in a total quality setting?
to help personnel develop positive attitudes toward ethical
behavior and to understand its importance. Almost 40% of 7. What role does integrity play in a total quality setting?
organizations in the United States with more than 100 em- 8. What role does responsibility play in a total quality setting?
ployees provide ethics training. It is best to conduct ethics 9. Describe and differentiate among the following approaches
training from the perspective of a code of business conduct to ethics: best-ratio approach, black-and-white approach, and
that makes clear the organization’s expectations concerning full-potential approach.
ethics.
10. What is the manager’s role in ethics?
10. There are numerous models available for making ethical de-
11. Explain the organization’s role in promoting ethical behavior.
cisions. In choosing a model, it is important to analyze it to
determine its underlying premise to ensure it is a premise the 12. Why, in your own words, would an otherwise ethical person
organization can agree with. In analyzing models for making make an unethical decision?
ethical decisions, one should ask: What is the premise behind 13. Define the term corporate social responsibility.
 Chapter Four Quality Management, Ethics, and Corporate Social Responsibility 63

critical thinking activity materials. She is facing a dilemma. There is an opening in her de-
partment, and her brother has applied for it. Because her brother
has been out of work for several months, he is having a great
an Ethical Dilemma deal of trouble supporting his wife and two children. The fam-
Image Products Inc. and Lovan Corporation are major producers of ily pressure on Vanessa to hire her brother is intense. But there
shampoos, conditioners, and other bath products for women. They is a problem: Although she has no doubt her brother could do
are also intense competitors. Recently, Lovan has surged ahead in the the job well, two other applicants are better qualified. Further,
marketplace on the strength of a new shampoo that is outselling the Vanessa, her brother, and the two better-qualified applicants are
leading products of all competitors, including Image Products. This all minorities, so her company’s equal employment opportunity
new product is based on a supersecret formula that produces a sham- policies will not help her in making the decision, nor will the
poo with a silky texture and a pleasant aroma. Consumers love it. company’s other employment policies, which allow the hiring of
John Parker, supervisor of the research and development de- family members. Vanessa feels a strong sense of responsibility for
partment for Image Products, is under intense pressure to repli- the productivity of her department. She also loves her brother
cate Lovan’s formula. Unfortunately for Parker, all of his attempts and wants to help him. This is the first real ethical dilemma she
to break the code have failed. As a result, Image Products has lost has ever faced.
so much market share that company-wide layoffs are imminent. If Vanessa doesn’t hire her brother, she might be ostracized
Parker’s wife and their daughter, who is three months pregnant, by her family, and her brother’s already precarious financial
both work at Image Products. Both will lose their jobs in the first condition might get even worse. On the other hand, she is re-
round if layoffs are necessary. Because the firm is located in a rural sponsible for hiring the best new team member she can identify.
one-company town, the chances of his wife and daughter finding This type of ethical dilemma is not uncommon in the modern
other jobs are slim at best. workplace.
A potential solution has fallen into Parker’s lap. A disgruntled
chemist from Lovan has applied for a vacant position in Parker’s
department. He has made it clear to Parker that, if hired, he can Discussion Question
bring Lovan’s coveted formula with him. However, he will do so Discuss the following question in class or outside of class with your
only if Parker brings him in at top dollar—a demand that is not fellow students:
justified by the chemist’s credentials. 1. If you found yourself facing a similar dilemma, what would
Assume that John Parker is a friend and that he asks your ad- you do? Why?
vice about how to handle this situation. What will you recommend
to him, and why? What model would you apply in dealing with this
dilemma if you were in Parker’s position? Why? endnotes
1. Ethics Resource Center. Retrieved from www.ethics.org on
discussion assignMent 4.1 January 6, 2011.
2. Ibid.
an Ethical Dilemma 3. International Organization for Standardization Strategic
Vanessa Jones is the manager of the phenolics department of Advisory Group on Corporate Responsibility. Retrieved from
PlastiTech, a manufacturer of industrial plastics and composite www.iisd.org/standards/ on March 11, 2011.