Do Courses in Ethics Improve
the Ethical [udgment of Students?
T. R. MARTIN
The author is indebted to Dr. David Allen of the
Marquette University College of Businessfaculty for his
assistance in statistical analyses and to Dr. Lynn Miner,
Director of the Office of Research Support, for his help
in the design of the research.
With a growing interest in the subject of
business ethics in the nation's business
schools, professors of management ask a
recurring question: 'Can ethics be taught?
According to one school of thought, by the
time people reach college age their moral for-
mation is, by and large, complete. The sug-
gestion is, therefore, that formal courses in
ethics will have little effect in the sense that
students willleam to be "more ethical." Miller
and Miller say, for example, "It seems to us
that it is impossible to deal effectively with
the problems of integrity in business at any
level other than the highly personal one of the
integrity of the executive. If you accept that
premise, then most of the courses at the uni-
versity level become an exercise in futility.'?
Other scholars are more sanguine. Purcell, in
a study of Dartmouth's Tuck School alumni
who had graduated ten years earlier, found
that, "Most of them [the respondents] report
that they have been helped toward ethical
behavior in business by their study of mana-
gerial ethics during their student days at
Dartmouth,'? And Powers and Vogel argue
in a recent work that, "The goal of busi-
ness ethics training is not, then, to teach the
manager how to resolve a specific moral
dilemma... what business ethics training seeks
is to develop the faculty of, or capacities for,
moral judgment in business contexts: the
ability to integrate a concern for the welfare
of people with one's managerial role and to
implement this concern completely.'?
Whatever the goals of teaching ethics may
be, and however uncertain its effectiveness,
a large number of business schools are offer-
ing ethics study. Certainly there is general
agreement among business school faculties
that ethics in business is a matter of grave
concern, and many are at least willing to try
to deal with it in the curriculum. Indeed, the
official accrediting body for business pro-
grams, the American Assembly of Collegiate
Schools of Business (AACSB), has an accredi-
tation standard that explicitly requires some
coverage of the subject in the so-called
common body of knowledge: "a background
of the economic and legal environment as it
pertains to profit and/or nonprofit organiza-
tions along with ethical [emphasis added]
considerations and social and political
influences as they affect such organiza-
tions ... "4 Sometimes schools offer courses
under the heading of "Ethics in Business" or
something similar, with the entire course
material devoted to the subject. In other
cases, the subject is treated as part of a
broader one, such as "Business and Society."
The matter of ethics also often arises in the
ordinary course of teaching other business
subjects, such as marketing and finance.
What effect does the study of ethics have
on the ability of students to analyze business
situations posing an ethical problem? An
effort was made to examine this issue by
means of a pilot study at Marquette Uni-
versity. The College of Business Administra-
tion baccalaureate program requires two
courses at the senior level: Theory of Ethics,
usually taken in the fall semester, and
Contemporary Ethical Problems, usually
taken in the spring semester. All Business
students thus take six credit hours of work
in ethics - an atypically large requirement
among U. S. collegiate schools of business.
Both courses are taught in the Philosophy
Department and are taken by many other
undergraduate students in the University as
well as by the Business students. The course
descriptions are as follows:
Theory of Ethics: Nature of the moral
act. The norm of morality. Natural and pos-
itive moral laws. Conscience, rights, and
duties.
Contemporary Ethical Problems:
Ethical considerations concerning human
rights and responsibilities in social and racial
justice, war and international relations,
expressions of dissent, and sexual conduct.s
For purposes of the study described here,
Business seniors were chosen as the experi-
mental group. Engineering seniors were
selected as the control group. Engineers are
not required to take ethics courses and seldom
enroll in them on an elective basis. Largely
as a matter of convenience, students other
than those in Business and Engineering were
included in the study. The research instru-
ment was administered in ethics classes which
included students enrolled in other programs
(Liberal Arts, Nursing, etc.) as well as in
18 BUSINESS AND SOCIETY
Business. This in effect supplied a second
experimental group (labeled "Other"), as they
too would be completing the two-course
sequence in ethics.
Hypotheses
The principal hypothesis of the study (h.)
was as follows: Business students will show
significantly more improvement in their
senior year in their ability to analyze ethical
business problems than will Engineering
students. The difference in such "ethical sensi-
tivity" is attributable to the exposure of Busi-
ness students to a body of ethical theory.
Other hypotheses were also advanced
and tested:
(h2) - Good students will show more skill
than mediocre students in analyzing
ethical problems. *
(h3 ) - Good students will show more im-
provement than mediocre students.
(h4) - Students will give better answers to
the question, What is the ethical
thing to do? than to the question,
What would you do? (The opera-
tional definition of answer quality is
described below.)
(hs) - Catholic students will show more
skill than non-Catholic students. * *
(hs) - Female students will show more skill
than male students. ** *
"Good students were defined as those whose cumu-
lative grade point averages were 3.50 or above on a
4.0 scale. Mediocre students were those below 2.50.
""The student body is heavily Catholic. among whom
a substantial number have had a considerableamount
of religious training in grammar and high school.
""" A Gallup poll conducted in 1979 indicated that 45
percent of college women considered their religious
beliefs to be very important, whereas only 33 per-
cent of the college men so responded. (Reported in
"EmergingTrends," The Princeton Religion Research
Center, Princeton, N.J., June, 1979, p. 3.)
 Methodology
A research instrument consisting of twenty-
four "scenarios" was prepared. Each describes
a business situation requiring ethical
analysis - for example, the propriety of pur-
hasing common stock on the basis of inside
information about a pending merger. The
subject is asked to judge the situation and
categorize it according to four choices:
ethical, probably ethical, probably unethical,
or definitely unethical. The scenario technique
has been used effectively in the study of busi-
ness ethics since at least 1961, when Baum-
hardt's landmark work was published."
Undoubtedly it has limitations, but it appears
to be the best technique developed to date for
probing ethical understanding.
The twenty-four scenarios were divided
into sets of six each: Ia, Ib, Ila, and lib. In
the la and Ib sets, the question asked the
respondent was, essentially, What would you
do? In the lIa and lib sets, the question was
essentially, What is the ethical thing to do?
The scenarios in lIa and lib were duplicates
or replicates of the scenarios in la and Ib
respectively. Thus, in the II series only the
question was different - not the situation.
A group of students enrolled in the fall
course, Theory of Ethics, completed the
instrument early in the semester as did a
group of students enrolled in senior Engi-
neering courses. Approximately one-fourth of
each group completed one of the four sets of
scenarios. Near the end of the second (spring)
semester, the instrument was again admin-
istered. Students who had participated in the
fall test completed the other half of the set
they had taken in the fall. That is, a student
who completed la in the fall completed Ib in
the spring; completion of Ib in the fall called
for taking la in the spring; the same scheme
was used for the lIa and lib sets. Spring parti-
cipants who had not participated in the fall
took one of the four sets on a random basis. *
In effect, therefore, the study design approxi-
mated a "before-after with control" experi-
mental design with the ethics courses func-
tioning as the treatment variable.
Each answer was given a score of 4 for the
best answer, 3 for the next best, 2 for the next,
and 1 for the worst. "Best" was determined
by the expert judgment of a group of profes-
sors whose primary or ancillary discipline is
ethics. Two were from the Philosophy
Department and are actively engaged in
teaching ethics. One, with a broad back-
ground in moral theology and philosophy,
was from the Economics Department and
teaching a seminar in business ethics. Another
was an ethicist, a former faculty member who
taught courses in business ethics as well as in
jurisprudence in the School of Law. The last
was a professor in the Marketing Department
who has done considerable research in the
area. These were the authorities who studied
the scenarios and agreed on the answers.
Results and Discussion
The overall mean scores (all sets) were as
follows:
Fall Spring
(n) (n)
Business students 2.86 (100) 2.90 (137)
Engineering students 2.88 (116) 2.87 (117)
Other students 2.85 (274) 2.84 (145)
All students (composite) 2.86 (490) 2.87 (399)
It should be noted that a purely random
choice of answers would result in a mean
score of 2.50 in a large universe-
(4+3+2+1)/4-which provides a baseline
for viewing the above data. Thus, on balance
the participants were on the right side of the
questions. That is, they agreed with the pro-
fessionals in terms of what were the proper
ethical actions to be taken. (However, the
composite score on one scenario was below
2.50.)
The principal hypothesis (h.), that Business
students would show significantly more
'In view of the methodology of the study, a question
would arise: Would simply taking the test in the fall
"sensitize" students to the test-taking and affect the
results in the spring (second) semester? As some of the
Engineering students who took the spring test had not
taken the fall test, it was possible to compare their
results with those of Engineers who took both the fall
and spring tests. If sensitization occurred, the mean
scores of those who took both tests would have been
significantly higher than the scores of those who took
only the spring test. In fact. the results were the other
way around-2.72 (n=72) vs. 2.95 (n=49). Sensitiza-
tion was thus not in evidence.
WINTER/SPRING 19
 improvement between the "before" and "after"
tests than would Engineering students, was
clearly not supported. The results for the
"Other" group, also completing their second
course in ethics, bear out the finding for the
Business students; that is, no significant
change occurred. (An interesting feature of
the overall scores is the virtual absence of
even superficial variation among the three
student groups, as well as between fall and
spring.)
The difference between the overall average
of 2.86 and 2.50 is statistically significant. The
fact that the students came down on the
correct side more often than not is gratifying.
The degree to which the respondents' scores
exceeded 2.50, however, on its face seems
rather small. It also raises some pertinent
questions.
Do students tend to be tentative in taking
positions on ethical questions? In this study
they could choose "probably ethical"or "prob-
ably unethical" (which were scored 2 or 3 as
the case may have been), as well as "definitely
ethical" or "definitely unethical." There was
a large number of "probably" judgments. The
inference is that there was a large degree of
uncertainty on the respondents' part; they
were often unsure of themselves. Why?
. Another question arises from a post facto
observation on the difference between how
the respondents dealt with the scenarios in
which the answer is "ethical" versus those in
which it is "unethical." One might hypothe-
size that the mean scores would not be sig-
nificantly different. The fact is, however, that
they were: 2.75 on the "ethical." 2.91 on the
"unethical"- significant at the 1 % level. In
sum, the respondents were less able to judge
the "okays" than the "not-okays." Does this
reflect a common behavior pattern, a skepti-
cism which leads the student in doubt to guess
"unethical"?
Perhaps the most significantquestion raised
is, simply, why did not the students perform
in a better fashion? The small difference
between 2.86 and 2.50 on a 4.00 scale hardly
suggests an impressive ability to make ethical
judgments. Nothing in the study provides any
clues to this query.
20 BUSINESS AND SOCIETY
The other hypotheses fared as follows:
(h.) - Good students will show more skill
than mediocre students in analyzing
ethical problems.
The hypothesis was supported. The overall
results (both semesters combined) were as
follows:
Good students 2.97 (152)
Mediocre students 2.82 (144)
An analysis of covariance shows that grade
point average was positively related to
response score at the 1 % level of significance.
(h3 ) - Good students will show more
improvement than mediocre students
over the course of the academic year.
The hypothesis was not supported.
Fall Spring
Good students 2.97 (88) 2.98 (64)
Mediocre students 2.82 (87) 2.83 (57)
The data here reinforce the general infer-
ence that improvement did not take place
between the "before" and "after" tests; it did
not occur even in the best students, those with
cumulative averages of 3.50 or above. *
(h4) - Students will give "better answers to
the basic question, What is the ethical
thing to do? than to the question,
What would you do?
The hypothesis was supported but only
weakly. The overall mean score on Set Ia and
Set Ib was 2.80; on Set lIa and Set lib, it was
2.90. (The results become more meaningful
when examined scenario by scenario. See #4
below under "Commentary.")
(hs) - Catholic students will show more
skill than non-Catholic students.
The hypothesis was supported. The
overrall mean for Catholics was 2.89, for
non-Catholics 2.77 - very marginally signif-
icant. Given the emphasis in Catholic edu-
cation on the subjects of religion, morality
and moral conduct, one might expect the dif-
ference to be greater than it was.
'There is some logic in leaving Engineering students out
of the calculation as they take no ethics courses. The
results then are as follows:
Fall Spring
Good students 2.97 (72) 2.97 (47)
Mediocre students 2.80 (69) 2.77 (36)
In any case, no group showed improvement.
 (h6) - Femalestudents will score better than
males.
The hypothesis was barely supported.
Females averaged 2.89; males averaged 2.83.
When other variables are controlled, sex is
significant but only marginally. The differ-
ence does conform to the cultural stereotype
of the "sensitive" female but certainly not in
a very convincing fashion.
Commentary
The ethics courses taught in the Philosophy
department at Marquette University are not
avowedly designed to improve students'
ability to analyze the kind of situations
depicted in the scenarios used in this study.
The underlying assumption was that
improvement would occur as a by-product of
the class presentations, reading, discussions
and thinking that would constitute the entire
experience. If improvement in scores on the
scenarios used in this study were an accept-
able criterion by which to judge the effect-
iveness of the two-course sequence, one
would conclude that on that basis it is
ineffective. No such assertion - that this
criterion is acceptable - is made, however. To
repeat, the goals of the ethics courses do not
explicitly include the improvement of
judgment in ethical problem situations. With
respect to the major hypothesis of the study,
only two things may be said with virtual
certainty: Students who completed the two
courses in ethics responded to the scenarios
no differently than did students who did not
take the two courses, and neither group
showed improvement in their scores as they
completed their senior years.
It would be a mistake to read too much into
the results of the study - to deduce that ethics
cannot be "taught," for example. An ethics
course using the case method or some other
different pedagogy might enhance students'
ability to analyze ethical problem situations,
which could be a goal of teaching the subject.
A few observations growing out of this
study should be useful for anyone who seeks
to perform similar investigation.
1. Writing useful scenarios is difficult and
fraught with pitfalls. They must not be too
simple or they provide no test. They must not
be too long, at least if they are to be admin-
istered as they were in this study. They must,
of course, pose a genuine problem or issue.
And they must have an answer which
competent ethicists would agree is correct. All
this challenges the ingenuity of the one who
devises the scenarios. *
2. In designing research of the kind illus-
trated here, one must deal with certain
important distinctions. One of the first
concerns the difference between objective
ethics and subjective ethics. That is, a person
may do something unethical in the objective
sense but be acting ethically in the subjective
sense - a case of incorrect analysis. (The
abverse is also possible, of course.) For
example, one might reason that to be fair to
himself he is justified in overstating his
expense account because the company
"expects" him to do so and "everybody does
it." (This is the theme of one of the scenarios.)
The significance of all this is that a wrong
answer on an expense-account-padding
scenario, for example, would not necessarily
indicate a malicious intent to defraud. Reli-
able conclusions about intent, in fact, do not
flow readily from this kind of research.
3. How an individual or individuals would
act in a given real-life situation is probably
very difficult, if not impossible, to determine
in a synthetic fashion - through a scenario of
the kind used in this study, for example. The
respondent is asked, "Would you pad your
expense account?" He answers, "No." It does
not "cost" him anything to take this position.
Were he in the same real-life situation, he
might rationalize that a bit of padding is all
right. He then would act ethically perhaps in
the subjective sense, unethically in the objec-
tive sense. His decision in the real-life situa-
tion differs from that in the hypothetical situ-
ation because the presence of a potential gain,
or loss, distorts his judgment.
'Scenarios prepared for this study were pretested. A
few were discarded when they appeared to be too
ambiguous.
WINTER/SPRING 21
 4. One of the hypotheses in this study was
that the mean scores would be higher on Set
lIa and lIb (What is the ethical thing to do?)
than on Set la and Ib (What would you do?).
The overall data support the hypothesis but
not strongly. The reasoning behind the
hypothesis was that some students would
project themselves into some situations suffi-
ciently to sway their judgment - toward the
wrong side. Thus an effort was made to deter-
mine the differences between what respond-
ents would do and what they believe is the
ethical thing to do, whatever the reasons for
the differences.
Though the hypothesis growing out of the
above (h4 ) was mildly supported by the overall
results, one should be very cautious in draw-
ing conclusions from them. Of the 12
matched pairs of scenarios (i.e., Scenario 1,
Set la, versus Scenario 1, Set lIa, etc.), only
5 showed any significant differences in the
mean scores (fall and spring semesters com-
bined). In one of the 5, the difference was in
Set Ia Scenario 1 An Inside Tip
You are an employee of a large company called
Technical Products, Inc. The Treasurer's secretary
is a personal friend of yours. The secretary tells
you that the company has nearly completed
'negotiations to purchase a small company,
Viatechnics, for $25 per share. The secretary also
tells you that this is a closely guarded secret.
You find Viatechnics stock listed on the
American Stock Exchange, where it was last
traded for $16 per share. Youanticipate that you
could buy some of the stock at about that price
and that the price would rise to about $25 when
the merger is announced. You have some funds
available which you had anticipated putting into
the stock market anyway.
You would not want anyone in the Technical
Products company to know that you were buying
stock in Viatechnics. For one thing, the "leak"
might be traced back to the Treasurer's secretary.
It occurs to you, however, that you could arrange
with a close friend to buy the Viatechnics stock
in his name and turn the profit over to you.
Would you arrange to have some of the
Viatechnics stock bought for you?
Definitely would_ Definitely would not-X
Probably would_ Probably would not.,.,
22 BUSINESS AND SOCIETY
the other direction; that is, on the what-
would-you-do question, the score (2.99) was
higher than on the what-is-the-ethical-thing
question (2.57). In the other 4 of the 5, the
difference was in the direction hypothesized
in h4 •
A detailed examination of the results, to
search out why h, was supported in some
scenarios but not in others, does not shed
much light on the question. Perhaps the
explanation lies in the nature of each partic-
ular situation, bringing into play multiple
psychological factors beyond the scope of this
investigation.
By way of illustrating the scenarios and
demonstrating the difficulty of ferreting out
the reasons for the differences in results, four
scenarios are reproduced on the following
pages. * (The correct answer is indicated.)
'The actual test instruments did not have tilles but were
simply designated 51, 52, etc,
Set IIa Scenario 1 An Inside Tip
Mr. A is an employeeof a large company called
Technical Products, Inc. The Treasurer'ssecretary
is his personal friend. The secretary tells him that
the company has nearly completed negotiations
to purchasea smallcompany, Viatechnics, for $25
per share. The secretary also tells him that this
is a closely guarded secret.
Mr. A finds Viatechnics stock listed on the
American Stock Exchange, where it was last
traded for $16 a share. Mr. A anticipates that he
could buy some of the stock at about that price
and that the price would rise to about $25 when
the merger is announced. He has funds available
which he had anticipated putting into the stock
market anyway.
Mr. A would not want anyone in the Technical
Products company to know that he was buying
stock in Viatechnics. For one thing, the "leak"
might be traced back to the Treasurer's secretary.
It occurs to him, however, that he could arrange
with a close friend to buy the Viatechnics stock
in his name and turn the profit over to him.
Would it be ethical for Mr. A to arrange to
have some of the Viatechnics stock bought for
him by his friend?
Definitely ethical_ Definitely not ethical-X
Probably ethical_ Probably not ethical_
 Set Ib Scenario 5 Industrial Spying
You are the Purchasing Director of the Chelsea
Manufacturing Company.
For a number of years, Chelsea has purchased
a complex part for its major product from
Murphy, Inc. Chelsea is in the midst of a "make-
or-buy" decision on this part. The process for
making it is intricate and known, by and large,
only to Murphy, Inc. Because of its proprietary
knowledge of certain unpatenable processes,
Murphy imposes tight security in its plants,
especially with respect to visitors. Few outsiders
are allowed to go through the plant. Because the
two companies have had excellent relations for
a long time, Murphy will permit people from
Chelsea to visit its plant. In fact, however, few
people have.
In order to make an intelligent make-or-buy
decision, Chelsea needs to know how the complex
part is made. Your boss, the Vice President of
Manufacturing, suggests that you make a
"courtesy call"on Murphy, including a tour of the
plant. You could observe the process Murphy
employs on the part Chelsea has been buying
from it. The Vice President further suggests that
you ask questions of Murphy's employees who
work on the part - "judiciously, so that they will
not become suspicious." Then you could brief the
Vice President on what you were able to learn.
The Vice President contemplates setting up a
pilot operation to produce the part in Chelsea's
plant, using the technology you observe at
Murphy..
The people at Murphy are not aware that
Chelsea is studying the possibility of making the
part rather than buying it from them.
Would you follow the Vice President's sug-
gestion?
Definitely would_ Definitely would not.-X
Probably would_ Probably would not_
Set lIb Scenario 5 Industrial Spying
Cynthia is the Purchasing Director of the
Chelsea Manufacturing Company.
For a number of years, Chelsea has purchased
a complex part for its major product from
Murphy, Inc. Chelsea is in the midst of a "make-
or-buy" decision on this part. The process for
making it is intricate and known, by and large,
only to Murphy, Inc. Because of its proprietary
knowledge of certain unpatenable processes,
Murphy imposes tight security in its 'plants,
especially with respect to visitors. Few outsiders
are allowed to go through the plant. Because the
two companies have had excellent relations for
a long time, Murphy will permit people from
Chelsea to visit its plant. In fact, however, few
people have.
In order to make an intelligent make-or-buy
decision, Chelsea needs to know how the complex
part is made. Cynthia's boss, the Vice President
of Manufacturing, suggests that she make a
"courtesy call"on Murphy, including a tour of the
plant. She could observe everything she can about
the process Murphy employs on the part Chelsea
has been buying from it. The Vice President
further suggests that she ask questions of
Murphy's employees who work on the part-
"judiciously, so that they will not become sus-
picious."
The Chelsea Vice President of Manufacturing
comtemplates setting up a pilot operation to
produce the part in Chelsea's plant, using the
technology Cynthia observes at Murphy.
The people at Murphy are not aware that
Chelsea is studying the possibility of making the
part rather than buying it from them.
Would it be ethical for Cynthia to carry out
the suggestion?
Definitely ethical_ Definitely not ethical.-X
Probably ethical_ Probably not ethical_
Set Ib Scenario 1 Antitrust
You are the Chairman and Chief Executive
Officer of the Smith Company, a large manufac-
turer of an industrial product. You are
approached by representatives of the BBD Com-
pany about the possibility of Smith purchasing
BBD in its entirety. They explain that the BBD
Company is owned by one family, which wishes
to liquidate its holdings for estate purposes. They
indicate that a price of $25 million would be
satisfactory. You commission three other officers
of your Company to study the proposition and
make recommendations.
The investigation shows that BBD has about
a 10 percent market share. Your company, Smith,
has about 25 percent. Six firms, including Smith
and BBD, account for over 90 percent of the
business done in the country; the remainder is
done by companies in foreign countries, who are
gaining an increasing share of the U. S. market.
BBD, though considerably smaller than Smith,
has a disproportionately large share of the market
on the West Coast, where it is located. Smith has
not done well in that region, primarily because
of the effectiveness of BBD and its firmly
entrenched position.
The officers who worked on the investigation
are firmly convinced that a purchase of BBD at
$25 million would greatly strengthen Smith and
result in increased earnings per share for Smith's
stockholders. They unanimously recommend the
purchase.
Youagree with the investigating team's analysis
and recommendations. You are convinced,
furthermore, that BBDwill be bought up by one
WINTER/SPRING 23
of your competitors if not by Smith. If that
occurs, you believe the competitive situation for
Smith will suffer. You are especially concerned
about the West Coast, a growing market.
You ask your own company lawyers as well as
your outside law firm to explore the acquisition
idea from their viewpoint. The law firm warns
you that the U. S. Government will probably
oppose the acquisition on antitrust grounds. (The
basic antitrust law, the Sherman Act of 1890,
forbids combinations [e.g., mergers] that tend to
create a monopoly or reduce competition substan-
tially.) Your own Company lawyers, however,
disagree. They contend that the Antitrust
Division of the Department of Justice will look
into the acquisition if it is announced, but that
the Division probably would not try to prevent
the merger - and would lose in court if it did. The
BBD people indicate a lack of concern, regarding
any problem that might arise as your worry, not
theirs.
You take the subject to the Board of Directors
for consideration. One of the members, a
professor from a prestigious school of business,
argues against the acquisition, contending that it
would violate public policy. He argues that
responsible companies should obey the spirit as
well as the letter of the law.
Would you urge the members of the board to
vote for the acquisition?
Definitely would..-X Definitely would not_
Probably would.,., Probably would not.L
Set lib Scenario 1 Antitrust
Mr. B is the Chairman and Chief Executive
'Officer of the Smith Company, a large manufac-
turer of an industrial product. He is approached
by representatives of the BBD Company about
the possibility of Smith purchasing BBD in its
entirety. They explain that the BBD Company is
owned by one family, which wishes to liquidate
its holdings for estate purposes. They indicate that
a price of $25 million would be acceptable. Mr.
B commissions three other officers of his
Company to study the proposition and make
recommendations.
The investigation shows that BBD has about
a 10 percent market share. B's Company, Smith,
has about 25 percent. Six firms, including Smith
and BBD, account for over 90 percent of the
business done in the country; the remainder is
done by companies in foreign countries, who are
gaining an increasing share of the U. S. market.
BBD, though considerably smaller than Smith,
has a disproportionately large share of the market
on the West Coast, where it is located. Smith has
not done well in that region, primarily because
of the effectiveness of BBD and its firmly
entrenched position.
24 BUSINESS AND SOCIETY
The officers who worked on the investigation
are firmly convinced that a purchase of BBD at
$25 million would greatly strengthen Smith and
result in increased earnings per share for Smith's
stockholders. They unanimously recommend the
purchase.
Mr. B agrees with the investigating team's
analysis and recommendations. He is convinced,
furthermore, that BBDwill be bought up by one
of Smith's competitors if not by Smith. If that
occurs, he believes the competitive situation for
Smith will suffer. He is especially concerned about
the West Coast, a growing market.
Mr. B asks his own company lawyers as well
as Smith's outside law firm to explore the acqui-
sition idea from their viewpoint. The law firm
warns him that the U. S. Government will
probably oppose the acquisition on antitrust
grounds. (The basic antitrust law, the Sherman
Act of 1890, forbids combinations [e.g., mergers]
that tend to create a monopoly or reduce
competition substantially.) The Company
lawyers, however, disagree. They contend that
the Antitrust Division of the Department of
Justice will look into the acquisition if it is
announced, but that the Division probably would
not try to prevent the merger - and would lose
in court if it did. The BBD people indicate a lack
of concern, regarding any problem that might
arise as Smith's, not theirs.
Mr. B takes the subject to the Board of Direc-
tors for consideration. One of the members, a
professor from a prestigious school of business,
argues against the acquisition, contending that it
would violate public policy. He argues that
responsible companies should obey the spirit as
well as the letter of the law.
Would it be ethical for Mr. B to urge the mem-
bers of the Board to vote for the acquisition?
Definitely ethical..-X Definitely not ethical_
Probably ethical_ Probably not ethical_
Set Ib Scenario 2 Truth in Advertising
You have recently taken a managerial position
in a large newspaper company. You have
authority to reject any advertising submitted to
the newspaper which you regard as false 'or
misleading. One of your major advertisers is the
largest department store in your city, part of a
very large national chain. The department store
has just submitted an ad on "Indian Jewelry"
which strongly implies that the jewelry is hand-
made by American Indians in the Southwest.
It has been called to your attention by a
knowledgeable person that the jewelry resembles
that made by Indians of the Navajo tribe, but in
fact comes from Taiwan.
One of the better jewelry stores in town has
recently had a major promotion on "Navajo
Jewelry," including advertisements in your
competitor, also a daily newspaper, but not in
your paper. You are aware that this store's jewelry
is authentic Navajo and higher priced than the
jewelry the department store is offering.
You have called the advertising manager of the
department store to ask him to change the ad. He
told you that the advertisement came out of the
chain's New York headquarters with instructions
not to alter it in any way. He also told you that,
"This advertising is being run all over the
country," and 'The other newspaper [in your
town) will hit the streets on Wednesday with the
exact same ad - and they haven't raised any objec-
tions." He also made a thinly veiled threat to cut
down the amount of advertising his store does in
your newspaper.
Your immediate superior is a vice president of
the newspaper. He was in the job you now have
before he was promoted to vice president. You
do some investigating and find out that when he
was in your job he approved some advertising
that you would have seriously questioned.
Would you approve the advertising for your
newspaper?
Definitely would_ Definitely would not-X
Probably would_ Probably would not_
Set lIb Scenario 2 Truth in Advertising
Mr. C has recently taken a managerial position
in a large newspaper company. He has authority
to reject any advertising submitted to the news-
paper which he regards as false or misleading.
One of the newspaper's major advertisers is the
largest department store in the city, part of a very
large national chain. The department store has
The mean scores on "An Inside Tip" were
as follows:
Set Ia 2.99 (239)
Set lIa 2.57 (255)
One might speculate that some respondents
in Set Ia (What would you do?) would eschew
purchase of the stock for reasons other than
the ethical considerations. Perhaps some are
saying they would not buy common stock in
almost any case. (If so, the difficulty of
composing good scenarios is aptly exempli-
Fiedl)
The mean scores on "Industrial Spying"
were,
Set Ib 2.69 (237)
Set lIb 3.03 (235)
just submitted an ad on "Indian Jewelry" which
strongly implies that the jewelry is hand-made by
American Indians in the Southwest. It has been
called to Cs attention by a knowledgeable person
that the jewelry resembles that made by Indians
of the Navajo tribe, but in fact comes from
Taiwan.
One of the better jewelry stores in town has
recently had a major promotion on "Navajo
Jewelry," includingadvertisements in a competitor
newspaper, but not in Cs newspaper. C is aware
that this store's jewelry is authentic Navajo and
higher priced than the jewelry the department
store is offering.
C has called the advertising manager of the
department store to ask him to change the ad. He
told C that the advertisement came out of the
chain's New York headquarters with instructions
not to alter it in any way. He also told C that,
"This advertising is being run all over the
country," and 'The other newspaper (in Cs town]
will hit the streets tomorrow with the exact same
ad - and they haven't raised any objections." He
also made a thinly veiled threat to cut down the
amount of advertising in Cs newspaper.
Cs immediate superior is a vice president of the
newspaper. He was in the job C now has before
he was promoted to vice pressident. C does some
investigating and finds out that when he was in
Cs present job he had approved some advertising
that C would have seriously questioned.
Would it be ethical for C to approve the
advertising for the newspaper?
Definitely ethical_ Definitely not ethical-X
Probably ethical_ Probably not ethical_
Perhaps some participants were able to
rationalize that they would simply be follow-
ing orders (Set Ib), but the respondents did
not rationalize in the same fashion for
Cynthia (Set Ilb). It is interesting to ponder
what went on in the participants' minds, but
there is no way of going beyond that to firm
findings.
"Antitrust" showed the following results:
Set Ib 2.62 (237)
Set lIb 2.73 (222)
A substantial minority of the respondents
"saw" an ethical problem in this scenario and
disagreed with the panel of ethicists. The
percentages of market share cited do not sug-
gest monopoly, however, but simply fairly
WINTER/SPRING 25
typical concentration. Monopolizing or
attempting to create a monopoly, indeed,
could be unethical, law or no law. But there
is no evidence in the case that it is occurring.
"You" (or Mr. B) have an obligation to
support the acquisition in view of your con-
viction that it would be in the best interests
of the company. (The difference in the means
is not significant.)
The mean scores on the "Truth in Adver-
tising" scenario were,
Set Ib 3.09 (237)
Set lIb 3.34 (222)
The situation is a harsh one for the princi-
pal in the case. His superior, the vice presi-
dent, almost certainly will not take kindly to
the idea of rejecting the advertising. The
respondents' consensus position, nevertheless,
was a fairly strong one and on the right side.
(The difference between the means is highly
significant. )
5. An investigation confined to measuring
the ability to analyze problem situations in
the abstract, so to speak, is probably more
reliable than one that seeks to determine what
the respondents would actually do, given all
the capacity we humans have for rational-
ization and mysterious conduct. But even
with the inherent difficulties of researching
how people would act, some insights might
be provided by asking the what-would-you-
do question.
6. The outcome of this project raises
another intriguing question. As previously
pointed out, two conditions are essential to
ethical decision-making: a correct analysis-
the objective element - and a resolve to
choose the ethical alternative - the subjective
element. * When business "irregularities" are
disclosed, the implication is that the per-
petrators are "crooks." No doubt they often
are-criminals, purely and simply, white-
collar or otherwise. But quite apart from the
subjective element, the results of this study
suggest that "tomorrow's managers" (students)
often make incorrect analyses of ethical
problem situations. Would it not follow that
they would often tend to act unethically - in
the objective sense? At least the results here
suggest that there is much room for improve-
26 BUSINESS AND SOCIETY
ment in ethical "quotients," in the ability to
handle complex real-life situations.
7. A final observation has almost been
implied. If one of the goals in teaching
business ethics is to improve students' ability
to ananlyze ethical problems, a before-after
procedure of the kind used here, which would
demonstrably measure progress, is certainly
desirable and perhaps attainable. This would
fall into the category of "output" or "value
added" measurements. These, embracing a
number of subjects, are the object of an
ambitious research project currently being
conducted under the auspices of the AACSB,
which, it is hoped, will lead to an improved
accreditation process for collegiate schools of
business.
'''Now the cause of action is will or deliberate choice,
and the cause of choice is desire and a reasoned
conception of the end we are seeking to attain. Choice
therefore entails the exercise of reason or thought as
well as a disposition of character. But thought. if it
is to have some practical result - for of itself it can set
nothing in motion - must have an object.... Thus we
view choice either as thought wedded to desire or desire
wedded to thought. In man, the originating cause of
action, the two elements work in combination."
(Aristotle, Nichornachean Ethics, Box 6, Ch. 2,
1139a32-1139b5.)
REFERENCES:
1. Mary Susan Miller and A. Edward Miller, "It'sToo
Late for Ethics Courses in Business Schools," The
Business and Society Review, Spring, 1976. p. 40.
2. Theodore V. Purcell, "Do Courses in Business
Ethics Pay Off?" California Management Review,
Summer, 1977, p. 58.
3. Charles W. Powers and David Vogel, Ethics in the
Education of Business Managers, Hastings-on-the-
Hudson, N.Y., The Hastings Center, 1980, p. 40.
4. Accreditation Council Policies, Procedures and
Standards 1980-81, American Assembly of Collegiate
Schools of Business, St. Louis, Mo.. 1980, p. 34.
5. Thomas F. McMahon, Report on the Teaching of
Socio-Ethical issues in Collegiate Schools of Busi-
ness/Public Administration, Center for the Study of
Applied Ethics, University of Virginia, 1975.
6. Combined Undergraduate 1980-81 Bulletin.
Marquette University, Milwaukee, WI., 1980, p. 297.
7. Raymond C. Baumhardt, "How Ethical Are Busi-
nessmen?" Harvard Business Review, (July-August)
1961, pp. 156-176. See also Merle C. Crawford,
"Attitudes of Marketing Executives Toward Ethics in
Marketing Research," Journal of Marketing, ArriL
1970, pp. 46-52; Steven N. Brenner and Ear A.
Molander, "Is the Ethics of Business Changing?"
Harvard Business Review, (January-February), 1977,
pp. 57-71; William Rudelius and Rogene A. Buckholz,
"Ethical Problems of Purchasing Managers," Harvard
Business Review, (March-April), 1979, pp. 8,12,14.