Managing Business Ethics: Straight Talk about How to Do It Right, 6th Edition Solution Manual

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1Chapter 1Introducing Straight Talk About Business Ethics: Where We’re Going and WhyContents:(Please note: the Instructor Guide for every chapter will follow this structure.)1.Chapter Outline2.Discussion Questions–Teaching Notes3.In-ClassExercises4.Homework Assignments5.AdditionalResourcesChapter OutlineI IntroductionII The Financial Disaster of 2008A.Borrowing Was CheapB.Real EstateBecamethe Investment Of ChoiceC.Mortgage Originators Peddled“Liar Loans”D.Banks Securitized the Poison and Spread It AroundE.Those Who Were Supposed to Protect Us Didn’tIII Moving Beyond CynicismIV Can Business Ethics Be Taught?A.Aren’t Bad Apples the Cause of Ethical Problems in Organizations?B.Shouldn’t Employees Already Know the Differencebetween Right and Wrong?C.Aren’t Adults’ Ethics Fully Formed and Unchangeable?•Defining ethics•Good control or bad control?V This Book Is About Managing Ethics in BusinessVI Ethics and the LawVII Why Be Ethical? Why Bother? Who Cares?A.Individuals Are About Ethics: The Motivation to be EthicalB.Employees Care: Employee Attraction and CommitmentC.Managers Care About EthicsD.Executive Leaders Care About EthicsE.Industries Care About EthicsF.Society Cares: Business and Social ResponsibilityVIII TheImportance of Trust

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1IX The Importance of ValuesX HowThisBook Is StructuredXI ConclusionXII Discussion QuestionsXIII Exercise: Your Cynicism QuotientDiscussion Questions–Teaching Notes1.Before reading this chapter, did you think ofethics as "just a fad?" Why or why not?What do you think now? Why?Probes to Stimulate Discussion•"If a roving reporter had stopped you last week on the street and asked you your opinion ofthe attention being given in the media to business ethics, what would you have said?"•"Would you have said the same thing if the street had been Wall Street?"•"Has your opinion changed since reading this chapter? Why?"•"What three points would you use to respond to someone who claims that businessethics isa fad?"2. Have you been cynical about business and its leaders? Why or why not?(See the following cynicism exercise.) How does cynicism affect you, as a businessstudent or as a manager?Probes to Stimulate Discussion•"If you are cynical, name two instances that illustrate the source of your cynicism."•"What about each of these instances makes you cynical?"•"If you don't feel cynical, what is your opinion about the lapses in ethics represented by suchpractices as sexual harassment disclosures, attempted bribes, or skimming profits?”•"What does your score on the "Cynicism Quotient" mean to you? Were you surprised by it?"•“How does cynicism affect you, as a business student or as a manager?”•"In what ways would the cynical attitudes of others influence your ethical behavior?"

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 13.Can you think of something that is legal but unethical, or something that is ethical,but illegal?Probes to Stimulate Discussion•“If something is legal but unethical, what do you think would be the bestway to ‘manage’ itin the organization?”•“Is it appropriate for an individual to act on personal ethical beliefs (e.g., pro-life beliefs) in awork organization? For example, would it be appropriate to picket your company for offeringhealth care benefits for abortion?”4. Do you think business ethics/social responsibility is important? Why or why not?Recall what was said in Chapter 1 about the cynicism of the public regarding business andindustry in light of the media coverage of their ethical lapses:a. Public holds contemptuous mistrust of many professional groupsb. Prevalence of cynicism among managers and business students that employers do orwill require them to compromise their ethicsc.Causes of cynicism:•Businesses' preoccupation with gain•Lack of reinforcement of ethical behavior•Competition•Acceptance of unethical practices within business and industry•Perception that only results are important•Ineffective enforcement of ethics codesAlthough there are mixed research resultsregarding the claim that good ethics is goodbusiness, it behooves any intelligent organization to get and maintain an ethical image if theywant to retain and increase their client base.It is the social responsibility of organizations to conduct their business ethically, because theyare role models for their employees and society at large.Business ethics gives an organization the knowledge and skills necessary to:•Set ethical standards for themselves and their employees•Establish policies and practices that support ethical behavior•Provide managers the tools to manage unethical behaviorProbes to Stimulate Discussion•"Regarding the responses above, what was the basis of response #1?" (Economic concern)•"What was the basis of response #2?" (Moral concern)

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1•"Have you observed situations where business ethics was important? Describe one. Whatwould have happened differently if the participants hadn't behaved ethically?"•"Briefly describe two different situations, one which relates an ethical behavior that you haveobserved, the other which relates an unethical behavior that you have observed."5. Identify reasons why an organization would be interested in being ethical, and classifythose reasons in terms of whether they represent moral motivation or economicmotivation.Possible Answers with Economic Motives•Ability to attract employees•Better public image•Industry pressure•Sentencing guidelinesPossible Answers with Moral Motives•The fair and right thing to do•Consistent with values of theorganizationProbes to Stimulate Discussion•"Let's take a poll before we answer this question. How many think there will be morereasons dealing with moral motivation and how many think there will be more reasonsdealing with economic motivation?" Ask for show of hands, and then ask volunteers fromeach side of the question. "Why did you vote the way you did?"•"What are three attitudes that predominate in ethical decision making in your organization?"•To what extent is each level responsible?"•"Is operating on the philanthropic level an option or a responsibility?"6. Think about the television programs and films you've seen recently in which businesswas portrayed in some way. How were business and business people portrayed? Isthere anything business could or should do to improve its media image? Somebusinesses try to stay out of the limelight. Why might that be? What do you think of thatstrategy?Probes to Stimulate Discussion•"Describe a situation from a television show or a film in which an unethical behavioroccurred. Who was involved? What were the results to others of the unethical behavior?Have you seen this kind of situation before in other shows or films? Does this represent "artimitating life" or "showing what sells?"•"Do you think the media is being responsible in the way it reports the ethical behavior ofindividuals and organizations?"•"Does the media teach ethics in their story lines? What kind of ethics do they teach?"

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1•"In addition to outright unethical behavior, what are the other ways in which businesscontributes to the image of "profitfirst"?"7. Do you believe that employees are more attracted and committed to ethicalorganizations? Are you? Why or why not? Make a list of the companies you wouldprefer to work for and the reasons why. Are there also companies that you would refuseto work for? Why? Are there “ethically neutral” companies that don’t belong on eitherlist?Possible Answers•Research suggests that individuals are attracted to ethical organizations.•Students line up to apply for jobs atVanguard,Google,and other highly regardedcompanies because of their excellent reputations for ethical management.Probes to Stimulate Discussion•"What can average employees do in an ethical environment that they can't do in anunethical one?"•"If we believe that employees are more attracted to ethical organizations, does that supportthe contention that moral motives are every bit as powerful as economic ones in peoples'decision making?"•"What are the flaws in thinking only about economic motives?"•"What are the flaws in thinking only about moral motives?"•"Imagine that you've been asked to describe five characteristics of an ideal organization.What would they be? Take 3 to 5 minutes to think about this so you don't just write downthe first things that come to your mind. Is ethics among the top five characteristics? Why orwhy not?"8.Discuss the importance of trust in business. Can you cite examples? What happenswhen trust is lost?Possible Answers•Trust is essential to efficient business–if there is no trust, it’s almost impossible to dobusiness.•Without trust, one needs complicated contracts and lots of lawyers.•In situations where trust is high, business can be conducted with a promise and ahandshake.•Regulators and the public are forgiving when companies try to do the right thing; they’re veryunforgiving with companies that lie or stonewall.•The best insurance policy a company can have is the will to do the right thing.Probes to Stimulate Discussion•“In the wake ofthefinancial debacle, what will it take for the investing public to regain theirtrust the financial markets?”

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1•“How do you think the financial crisis has affected the reputations of financial firms such asCitigroup, Morgan Stanley, Bank of America, and Goldman Sachs? Do you think collegestudents are as eager to be hired by one of those companies as they used to be before thecrisis? Have these firms suffered as a result of the crisis. If no, why not?9.What can we learn about business ethics from the recent financial crisis?Possible Answers:’•A lot of people think, “Greed is good.”•The financial industry (Wall Street, government, regulators, rating agencies–pick yourpoison) is corrupt.•Unregulated business can be a recipe for disaster.•Ordinary people who invest are no match for professionals–it’s all “inside baseball.”•Huge compensation packages can cause huge problems.Probes to stimulate discussion:•Who do you think was most to blame for thefinancial crash of 2008?•Has anyone been punished for his or her role in the crisis?•Do you know of anyone who suffered harm as a result of this financial collapse?•Will new regulations help prevent a future crisis?•What role do you think compensation played in the crisis?•What role will the bailouts of 2008 play in future crises?In-Class ExercisesExercise #1: Who Has Integrity?As you know, it’s important to get students engaged in the subject matter of a course as soon aspossible. You can begin this process of interaction in the first class by asking students tointroduce themselves and describe someone they know who has high integrity. Here’s how itworks:1.Allow each student about 1 minute (give or take) to introduce himself/herself anddescribe a “person with high integrity” in his/her life. (Most of the time, students will talkabout their parents or grandparents.) So, if you have 25 students in your class, it willtake about 30–40 minutes to complete this exercise.2.Ask each student for two things:a.Introduction: their name, year, and majorb.Who do they know with high integrity–and describe how that person behavesthat makes that obvious3.You should start it off by describing someone YOU know who has high integrity–demonstrate what you want from your students and take a few minutes to do this. It willgive them time to think about an answer. Go around the room in order.4.As students rattle off the qualities that indicate integrity, write them on the blackboard orflip chart and try to distill the qualities they are describing. Typical responses include:consistency. honesty, high standards, kindness, focus on others (not just themselves)etc.

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 15.When the students have finished, the blackboard should contain an overview of thecharacteristics most of us think of when we consider honesty and integrity. The students’words will have “painted a picture” of integrity.Exercise #2:Your Cynicism QuotientThis is a great exercise because it will give students some idea of how they have been affectedby media portrayals of business people. Of course, you can use this as a PPT slide and ask fora show of hands for each question. You can also hand out a paper survey in class and havestudents complete it right there as an in-class exercise and use it as a springboard fordiscussion. You can also use a free online web survey (like Survey Monkey) and have studentscomplete the survey online. You can then tally their responses and use the results in the nextclass to spur discussion. Students will no doubt be surprised by the results.A note: In research that is currently underway–we’ll write about the results in the next edition ofthe book–we’re finding that about 20% of male and 10% of female undergraduates are verycynical and about 10% of males and 5% of female undergraduates are moderately cynical.You can copy the grid on the following page and use it in class.

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1Your Cynicism QuotientAnswer the following questions as honestly as you can. Circle the numberbetween 1 and 5 thatbest represents your own beliefs about business.StronglyDisagreeStronglyAgree1. Financial gain is all that counts inbusiness123452. Ethical standards must be compromised inbusinesspractice123453. The more financially successful thebusinessperson, the more unethical the behavior.123454. Moral values are irrelevant in business123455. Thebusiness world has its own rules.123456. Business persons care only about making profit.123457. Business is like a game-one plays to win.123458. In business, people will do anything to furthertheir own interest123459.Competition forces business managers to resortto shady practices.1234510. The profit motive pressures managers tocompromise their ethical concerns.12345Scoring Procedures* Add the total number of points. The maximum is 50points. Total _____.* The higher your score, the more cynical you are about ethical businesspractices. Think aboutthe reasons for your responses. Be prepared todiscuss them in class.

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1Exercise #3We feel that it’s important to encouragestudents to think about what they stand for and what“brand” or image they are communicating to the world. Here’s an exercise we’ve used with greatsuccess. This entire exercise takes about 20-30 minutes and students generally are veryengaged while doing it.1. Design a slide that looks something like this: Try to use famous people who are very different(who have different “brands”). Below, we have featured Laura Bush, Donald Trump, TigerWoods, Oprah Winfrey, Paris Hilton, Barack Obama, and Bono. Just pull the images off of theInternet.2.Divide the class into teams of 3–5 students per team. Either assign each team a famousperson or ask each team to choose one they want to discuss.3. Ask the class if anyone present knows any of the famous people featured. (No one will!) Eventhough they don’t know any of these celebrities, they can probably answer these questionsbased on what they have read or heard about these people. Give the class 5–10 minutes todiscuss this in their teams.Here are some questions you might want to use, or use your own:•What three adjectives describe him or her?•What kind of car does he or she drive?•What is his/her favorite piece of jewelry?•What three artist/songs are at the top of their favorite playlist?•Where do they go for their news of the world?•Do they have a tattoo? If yes, of what and where?

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 14. Now have each of the teams report out. After each team announces its “guesses,” ask theentire class if they agree. (Almost everyone will!) “Does this sound about right?” When allteams have presented (combine presentations from teams who have the same celebrity), beginthe discussion.5. Why were they able to answer these questions? Was it easy? Was it difficult? In ourexperience, students find it very easy to “fill in the blanks” about these celebrities. The point:This happens to all of us! People extrapolate all the time based on what they already knowabout us. So, if you have given people the impression that you are casual about your standards,then they may well extrapolate and figure that you might cooperate with them in fudging thenumbers or lying to a client, etc. The very best protection you can have in the workplace is tounderstand what it is you stand for and then very consciously communicate it. We communicateour “brand” all the time, in everything we do. This exercise is a good way to begin to encouragestudents to think about what they are projecting to others and be mindful of that personal brandand what others may assume based on itExercise#4: What Would You Do?1.Divide theclass into teams of 4–5 students per team and have them consider the followingcase:“When your colleague, Bill, is out of town, you receive a call from his wife. She'shaving a crisis with one of their children and needs to reach Bill immediately.You offer to track him down for her and when you do, you inadvertently discoverthat he's vacationing with Marie, the chief investment officer of a prestigiouscollege endowment fund that Bill manages. He tells you to keep his location asecret and that he will call his wife immediately. Two hours later, his wife callsback and screams thathis cell phone is off andshe hasn't heard from you orhim. What do you do?”A)tell her you haven't been able to reach him. Then call your boss and update himon his wife's latest call.B)give his wife the numberof the hotelwhere she can reach him.C)tell your manager's manager about the situation.D)tell her that you left an urgent message for him, but she'll have to wait for his call.2.Ask them to spend a few minutes discussing this case as a team and deciding which courseof action they would take, making sure that they have justifications for their choice. Once theteams have reached their decisions, discuss the case as a group.Possible Probes to PromoteDiscussion:•What are the ethical issues involved in this case?(Most students will “miss” the conflict ofinterest issues (for Marie and the boss) and the risk to the firm of this relationship.•Who are the stakeholders?•Who has the most to lose?•What are your obligations?•What could happen if you do nothing?

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 13.Then reveal the “scores.”Scores:A) tell her you haven't been able to reach him. Then call your boss and update him onhis wife'slatest call. (-30--a big lie and collusion with the boss)B)give his wife the numberof the hotel where she can reach him. (10--deals only with theimmediate crisis, not the conflict of interest)C) tell your manager's manager about the situation. (30--the only option that has the potentialto deal with both ethical issues.D) tell her that you left an urgent message for him, but she'llhave to wait for his call. (0--also alie)NOTE: You can revisit this vignette several times during the semester to discuss ethicalframeworks (See Chapter 2) and moral awareness (Chapter 3).Homework Assignments:Assignment #1–Movie ReviewHave students choose a recent Hollywood film to watch for homework. They can watch in smallgroups or alone. The only requirement--that the film portrays business in some way. Haveeach student write a one-page thought paper on how business was portrayed in the film. Inclass, have a discussion about the general portrayal of business in film. What you should find isthat business is generally portrayed in negative terms. For example, most business people inthese films are motivated by greed.There are exceptions. For example, in Jerry Maguire, thelead character is motivated by an ethical code. But, throughout the film, he fights the greed ofothers. Discuss how this generally negative portrayal feeds public cynicism, and why studentsare choosing to study business if this portrayal is accurate.This assignment is a great way tobegin the class, especially for undergraduates who come to a business ethics class with little, ifany, work experience.You can demonstrate to them how much their beliefs and attitudes maybe influenced by the media.Some suggested films:Promised LandArbitrageSomething VenturedThe Company MenThe Devil Wears PradaInside JobThe Social NetworkToo Big to FailWal-Mart: The High Cost of Low PriceShattered GlassA Civil ActionOffice SpaceBoiler RoomClass ActionMichael ClaytonThe InternationalUp in the Air

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1Capitalism: A Love StorySickoThe Constant GardenerThe CorporationCrashDisclosureEnron: The Smartest Guys in the RoomThe FirmGlengarry GlenrossThe InsiderJerry MaguireNorma RaeNorth CountryPhiladelphiaQuiz ShowRoger & MeSyrianaWall StreetWorking GirlAssignment #2–Interview Someone You RespectThisassignment is actually a way for students to pay a huge compliment to someone theyadmire and it gives them plenty to think about if they interview someone who has highstandards. In our experience, many students select a parent, grandparent, or manager tointerview.Instructions:•Select someone who you respect and admire. Choose an adult whom you believe hashigh personal standards. The interview should be approximately 15–30 minutes inlength.•Ask the following questions or questions you select for the interview:oHow important do you think integrity is on a scale of 1 to 10 (1 being notimportant; 10 being vital)? Why?oWho had the most important influence on the formation of your ethical character?oDescribe a situation that you feel really tested your integrity. What are you gladyou did? Is there anything you wish you had done differently?oIn your experience, what factors can make it difficult for people to make ethicaldecisions?oHow important do you think it is for someone to be vocal or open about his or herpersonal standards?•Write a two-three page paper about the interview. Make sure you include the followinginformation about the person you interview:oName (or an alias if you wish the person to be anonymous)oRelationship to youoAge group (e.g., 20s, or 50s, etc.)oHow long have you known this person?oWhy did you choose this person to interview?

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1Additional Resources1. Frontline on PBSFrontline has produced a number of mostly one-hour programs on the financial crisis that areexcellent for use in class. A real plus is that most of them are free and can be viewed in theirentirety on the Frontline website–click “Watch Video Online”:http://www.pbs.org/wgbh/pages/frontline/Among the fascinating programs are:On the Financial Crisis:•The Retirement Gamble•The Untouchables•What Happened to the American Dream?•The Madoff Affair•The Warning•The Card Game•Inside the Meltdown•Breaking the BankOther Programs on Ethics in General:•Poisoned Waters•Sick Around America•Black Money•The Medicated Child•A Dangerous Business Revisited2. ThisAmerican Life on National Public RadioNo one tells as story as well as This American Life and there are many wonderful programs thatcan be assigned or listened to in class. Their website is at:http://www.thisamericanlife.org/radio-archivesAmong the best stories are:•Inside Job (2010 Archive–about the financial crisis and how one Chicago hedge fundmade hundreds of millions of dollars for itself whilemaking the financial crisis worse forthe rest of us)•A Giant Pool of Money (2008 Archive–about the financial crisis and what caused it)•Another Frightening Show About the Economy (2008 Archive–also about the financialcrisis)•NUMMI (2010 Archive–about a GM plant that could have saved GM if they had knownwhat to do with it)•Getting Away With It (2012 Archive–about people who break the rules and try to justifytheir behavior)•Loopholes (2012 Archive–about people who act on technicalities in the face of toughregulations)

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1•Take the Money and Run for Office (2012 Archive–about the deals that are made inback rooms by lobbyists and politicians)•Game Changer (2011 Archive–about fracking controversies in Pennsylvania)•There are many more shows on This American Life that explore business and personalethics and you can easily explore them by looking through their archives.3.Video: American DreamThis is a1991 documentary film about the 1986labor dispute between Hormel CompanyandHormel's union workers. Hormel lowered employee wages and simultaneously reported $29million in annual profit.4.American Apparel Website (www.americanapparel.net)This is a provocative website and organization. American Apparel manufactures clothing in LosAngeles and prides itself on making profits but also treating its workers in a very humane way–and it introduces people to workers on the website. The products clearly appeal to youth–thephoto collections are sexy and suggestive. That said, the website can make for some interestingdiscussions in class.5.Guest Speakers: Convicted White-Collar CriminalsSome people feel it is controversial to invitein a guest speaker who has served time for a white-collar crime. However, the authors’ experience in doing that has been positive. While somepeople feel strongly that we should not be “rewarding” ex-cons by paying them to speak to aclass, we feel that it can be an excellent teaching device. In our experience, ex-cons can delivera powerful message to students about crime if they are contrite and accept responsibility fortheir behavior. We have found that they generally deliver the following messages:•Ethical decision-making is a slippery slope.•Prisons–even the good ones–are no fun. In fact, they are just awful.•The effect of the whole “trial, conviction, incarceration, publicity” thing takes a terrible tollon the criminal’s family and can, in many cases, destroy family relationships.•It’s extremely difficult to get any kind of a job once you have been incarcerated.•They have paid a debt to society and they continue to pay that debt. It does not endwhen they are released from prison.The challenge is finding an ex-con who is contrite, professional, and is someone with whomstudents can identify. WecanrecommendAaron Beam,former co-founder and CFO atHealthSouthwho serveda shorttime in prisonfor his part in the accounting fraud. He isa goodspeakerand students react well to him. You can contactAaron via his website(www.aaronbeam.net).Another possibility is Mark Whitacre, the whistleblower from the ADM price fixing case (andabout whom the movie, The Informant, was made. He ended up in prison for years for fraud.His is a complicated but fascinating story. You can contact Mark via his websitehttp://www.markwhitacre.com/adm.html.Finally, another possibility isJustinPapernywho exited federal prisonin 2009 for his actions asa stockbroker with a prestigious firm in LosAngeles.According to Walt Pavlo (who used tospeak for us but has now gotten on with his life),Justin is the type of person who admitshisshortcomings and has learned from them.According to Walt, Justin is well spoken, humbleand tells his story in astraightforward manner. Justin has a degree from the University ofSouthern California andwas also on the baseball team at USC, appearing in the College World

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Managing Business Ethics, by L. Treviño & K. Nelson, 6thEditionChapter 1Series.Walt has transferred the website and the Etika business to Justin who willnow carry onthe work of teaching from mistakes that send too many ofour business leaders to prison.Formore information you can visitwww.EtikaLLC.comor email Justin directly atJustinPaperny@EtikaLLC.com.We recommend that you get references and check with otherbusiness ethics professors before inviting any untried speaker. We have found some speakersto be a bit too slick for our taste. You are giving these speakers credibility by inviting them socaution is definitely in order.On the other hand, this kind of event can be a highlight of asemester.

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