Take Your Conscience to Work: ND Business School Has Always Taught Ethics

Author: Ed Cohen

“We become the choices that we make,” declared the Saint Thomas Aquinas quote projected onto a screen in the front left corner of the room. It was there for the start of the third meeting of adjunct professor Bonnie Fremgen’s Introduction to Business Ethics class. And if any of the sophomores in the lecture room suspected it meant she was expecting them to make tough choices that day, they were right.

About 10 minutes and four transparencies past Aquinas, Fremgen asked the class to find a page in their course packets with brief descriptions of six ethical dilemmas. She divided the students into small groups and assigned each a scenario. Their job: Figure out the ethically correct course of action and explain their reasoning. They had five minutes.

In one of the scenarios, a student assigned to a team project kept missing the group’s meetings and wasn’t sharing equally in the work load. As usual, the arrangement was that everyone in the group would receive the same grade, based on the quality of their joint final report. What, if anything, were the diligent students to do about the shirker?

There was quick agreement among the class members: Talk to the person, reason with him or her, and if that didn’t work, appeal to the professor. Fremgen, who has taught introductory business ethics for seven years, smiled and nodded indulgently.

“And what is the professor going to say—that you have to work it out for yourselves, you’re going to be working all the time with people who don’t pull their weight.” She eventually conceded that in the interest of justice there needed to be a way for the instructor to judge who had done what on the project.

In another scenario a student had received a job offer and was being pressed to make a decision. The student accepted the offer. Then an offer arrived from the company the student preferred to work for. Would it be ethical to renege and take the second job?

The students said yes. They said that by pressuring the student for a decision, the first employer was engaging in “ethical egoism,” a concept discussed earlier in class. It means always putting one’s own interests first.

Fremgen suggested an alternative perspective: What if the student’s behavior gave the first employer the impression that graduates of this school were not to be trusted? What if the company stopped or curtailed recruiting from the school because of this? In that case, one person acting in his own self-interest might indirectly harm many other unseen “stakeholders.”

Or not. The point was, it’s something to think about.

In the wake of Enron, WorldCom, Tyco, Adelphia and other widely publicized corporate scandals of the past few years, the public may be wondering what business schools have been teaching people lately. Fremgen’s class is an example of what goes on—and has gone on for decades—at Notre Dame.

The five-week, one-credit course represents a kind of ethics boot camp. It’s not so much a look at fraudulent expense accounting, tax-law loopholing and other nefarious business practices—other courses do that. It’s about stepping back from everyday business concerns and asking, in the words of the author of the course textbook, Joseph R. DesJardins ’80Ph.D., “What kind of person should I be? What should I do? What kind of life will I live?”

If that sounds like catechism, well, this is a Catholic university. But beyond Notre Dame’s faith traditions, an emphasis on ethical decision-making has become recognized as a hallmark of the Mendoza College of Business. Earlier this year a survey of corporate recruiters conducted by the Wall Street Journal and Harris Interactive placed the Notre Dame MBA program among the top five nationally for producing graduates perceived as having high ethical standards.

Spend any time in Notre Dame’s business school and it’s clear that ethics is more than some politically correct nicety tacked onto the curriculum. Essentially every course the college teaches has some ethical dimension to it, but several focus specifically on the discipline. In addition to the introductory course—which this past fall became mandatory for all sophomores who have declared themselves business majors—undergraduates can take a junior-level course on ethical issues in such specific business specialties as accounting and marketing. A special field project gives seniors the opportunity to work for and report on the charitable efforts of social service agencies.

Nine ethics courses have been designed for MBA students, including Catholic Social Thought in Business and Corporate Ethics Statements. MBAs are required to take the introductory foundations course and at least one more. Among the many ethics courses offered outside the business school is one in theology titled Corporate Conscience.

The various teaching and research efforts in business ethics are coordinated by the college’s Center for Ethics and Religious Values in Business, founded in 1978, and the 2-year-old Institute for Ethical Business Worldwide.

During the past two spring semesters, Lizzadro Professor of Accountancy Tom Frecka has presented a five-week symposium on the business and accounting issues associated with the collapse of Enron, the giant energy-trading company. This spring he’s teaching a new course on how to investigate and uncover accounting fraud.

The business college has an Ethics Week, a Sophomore Ethics Day and a lecture series named for Cardinal John O’Hara, first dean of the business college and a former Notre Dame president, that brings senior executives to campus to speak throughout fall semester. Some business schools have started inviting convicted white-collar criminals in to describe their misdeeds and consequences to students in a sort of “scared straight” with neckties approach. Notre Dame has opted for exemplars of good behavior.

“Ours is more of the role-model approach,” says Patrick E. Murphy ’70, a professor of marketing and the C.R. Smith II co-director of the Institute for Ethical Business Worldwide.

The college publishes its own monthly ethics newsletter, Value Lines, now in its 28th year. September’s issue featured results from a survey of employees on workplace dishonesty, a prayer to say before beginning work, and inspirational quotes from, among others, comic actor, writer and director Albert Brooks. (“It’s better to be known by six people for something you’re proud of . . . than by 60 million for something you’re not.”)

The prodding even extends past commencement. For the past two semesters, the college has offered MBA alums a free, online course called Spirituality of Work to reflect on values and ideas about work and spirituality and to integrate personal beliefs into daily life. More than 120 alumni have requested to take the class, which can accommodate only 35 per semester.

“This is a defining characteristic of Notre Dame. It’s not just some marketing strategy,” Dean Carolyn Woo said of the college’s emphasis on values, community and integrity in an interview last year with the Chicago Tribune. Woo also serves as chair of the Association to Advance Collegiate Schools of Business International, a major business school accrediting organization. The association recently increased its emphasis on ethics in the standards schools must meet to receive accreditation.

Woo insists Notre Dame isn’t out to teach students right from wrong. “That started when they were 2 years old—we are past that stage.” And she says students already recognize unethical behavior when they read about it.

“The difference is, knowing and caring do not always lead to doing. Knowing what other people should do is very different from what we, ourselves, should do.”

“What we’re trying to accomplish in our classes is for people to have better peripheral vision, to have their antennas up higher and be aware of ethical issues,” says Murphy, the marketing professor and ethics institute director. “We give them more background if we can’t give them more backbone.”

Introductory courses like Fremgen’s and the similar one taught to MBA students try to lay a foundation for ethical reasoning so that when students are faced with a tough decision or are put in an uncomfortable position, they have a system to refer back to for choosing the best course.

Make that systems, because even a cursory review of business ethics reveals the field to be anything but one-dimensional. In addition to “ethical egoism,” there are constructs like utilitarianism (choose the course of action that produces the greatest good for the greatest number of people) and duty-based ethics, most famously promoted by philosopher Immanuel Kant in his “categorical imperative.” Kant’s principles include the notion that one should refrain from doing anything that would lead to problems if everyone else were to do it. For example, if everyone thought it was okay to cut in line, anarchy would result.

Business ethics can’t, however, be simplified down to one sentence: “Obey the law.” As DesJardins points out in his textbook, laws aren’t always ethical. Slavery was once legal. Likewise, double-dealings like “creative accounting” can be used to meet the letter of a law while defeating its obvious purpose.

Business ethics Notre Dame-style does tend to echo Catholic social teaching. Beyond obeying laws and refraining from lying and cheating, an imperative seems to exist to work to make the world a more just and humane place. Students are taught, for instance, that the subsidies developed countries pay to protect their own farmers’ markets can deny people in poor countries the chance to compete in the export market and improve their lives.

In his Conceptual Foundations of Business Ethics course for MBA students, George Enderle, the O’Neil Professor of International Business Ethics, points out that in some Third World countries it’s customary to bribe government officials to evade pollution laws. But is it ethical to endanger the health of employees and people living near the plants? What if the people willingly tolerate the environmental harm in return for jobs?

Business ethics teaches consideration for all parties affected by a decision, and that list is typically a long one, embracing stockholders, employees, creditors, local government, neighbors, unions, suppliers, distributors. Often interests conflict.

Anyone studying ethics today will be exposed to the case of Malden Mills. The family-owned company in Lawrence, Massachusetts, an economically depressed city near the New Hampshire border, manufactured Polartec fleece, used in high-quality outdoor apparel by such companies as L.L. Bean and Land’s End. In 1995 a fire destroyed its plant.

The owners might have taken the opportunity to move manufacturing out of the country to reduce labor costs and taxes—as many of its competitors had—or they simply could have pocketed the insurance money and quit the business. Instead, President Aaron Feuerstein, grandson of the company’s founder, pledged to rebuild the plant at the same location. And in a stunning announcement, he promised to continue to pay his 1,200 employees while the mill was being rebuilt and to let them keep their medical insurance.

Feuerstein’s generosity drew national media attention and much praise. Here was a business manager willing to sacrifice personal wealth for the welfare of his employees and community. But some critics called his actions irresponsible, saying a manager’s responsibility was to maximize profits.

In DesJardins’ view, the lesson to be drawn isn’t that everyone should aspire to be as magnanimous as Aaron Feuerstein, whom, it must be noted, didn’t have thousands of shareholders to answer to because the company was privately held. Rather, Feuerstein demonstrated that the manager of a business can step back and consider alternatives beyond those dictated by the profit-maximization model.

Another widely discussed issue in business ethics involves AIDS and Africa. Father Oliver Williams, CSC, ’61, ’69M.A., director of the Center for Ethics and Religious Values and an associate professor of management, tells of how he was approached by executives of the global pharmaceuticals company Merck.

Merck produces the so-called triple cocktail of drugs that effectively combats HIV. An estimated 29.4 million people in sub-Saharan Africa are infected with HIV, but the vast majority are too poor to purchase Merck’s medicines.

The priest, who studies how ethics of virtue might inform the ethical conduct of managers, says there was no easy answer. Withholding the medicine would be a death sentence to those infected. Giving the drug away would probably bankrupt the company. It wouldn’t work, either. Effective treatment, he says, depends on timing and calculating dosages of the medicines according to patients’ T-cell counts. The countries involved lacked clinics and trained professionals to manage the regimens.

Williams says Merck decided it couldn’t help everyone but could possibly help a single country. It settled on Botswana, where 35 percent of the population is HIV positive. An arrangement was worked out so that country’s government will provide funds to train paramedics. The Gates Foundation and Merck have agreed to donate $100 million for clinics and educational outreach. Merck will provide the medicines.

Williams is currently serving as a visiting professor at the University of Cape Town and Stellenbosch University in South Africa, and there AIDS is no less a dilemma for employers. The infection rate in South Africa is 15 to 20 percent, and the unemployment rate is 35 percent. As a result, employers who don’t require skilled labor have a choice: They can pay for the medicines their infected employees need to live. Or they can let workers die, knowing that thousands of replacements are readily available.

Williams says that on his final exam he asks his South African MBA students what they would do if they owned a mid-size company with limited financial resources.

“They’re not graded on the answer they give but on the thought process,” the priest says.

Making ethical decisions is one thing, but speaking out against unethical behavior in one’s workplace is something else. In a national survey reported in Value Lines, 54 percent of employees said they had witnessed specific ethical or policy violations, yet 65 percent of those aware of such activities said they’d decided to keep their mouths shut.

In a separate study Woo cites, a majority of MBAs surveyed said that if they encountered unethical behavior at their workplace they would leave the company rather than fight for change.

“That’s not a good thing,” the dean says, “because change has to come from within.”

The Sarbanes-Oxley Act of 2002, which aims to curb corporate fraud, includes protection for whistle-blowers who lawfully disclose information about their employer as part of a fraud investigation. But Woo says Notre Dame isn’t trying to train people to go running to police or the media when they witness wrongdoing at work. That’s because whistle-blowing can be an act of vengeance. Plus it would hardly meet the utilitarian ethical ideal to drive a company out of business and cost everyone, including the virtuous, their jobs if effective alternatives were available. Better to cure the disease without killing the patient.

Evidence suggests that employers now place a premium on hiring employees well-grounded in ethics—good news for Notre Dame students, given the school’s reputation. In a Wall Street Journal/Harris Interactive survey reported last fall, 84 percent of recruiters said personal ethics and integrity were very important attributes in job candidates. Recruiters told the paper they feel they can detect unethical people by, among other methods, observing body language in job interviews, checking character references and scrupulously examining resumes.

So maybe being ethical can help land you a job, but experts acknowledge that ethical decision-making doesn’t guarantee financial success.

“If ethical behavior always paid,” Harvard Business School Professor Richard Tedlow said in a 2002 article in USA Today, “everyone would always be ethical.”

In his O’Hara Lecture in September, Ethan Allen Interiors CEO Farooq Kathwari told the audience, “People have to know that doing something good is better than doing something big in a mediocre way, or doing something unethical, because you’re never going to be happy. You’re always going to be looking over your shoulder.”

Kathwari is a Muslim from the disputed Kashmir province of India who has worked to promote peace in the region while successfully reinventing the retailer’s early American image to be more contemporary.

But however much praise an ethical business manager receives, the business must still turn a profit. After reading about Aaron Feuerstein’s largesse, the sophomores in Bonnie Fremgen’s class wanted to know what had become of him. Answer: He lost his company. Malden Mills emerged from its second term in bankruptcy last October, nearly two years after filing for protection from creditors. The creditors hold four of the seven seats on the company’s board of directors; Feuerstein has one of the other three. He holds a 5 percent stake in the Malden Mills but has been trying to buy back a controlling interest and keep the company in Lawrence.

Woo says she is sometimes asked by students, “‘If you’re a nice guy, don’t you have to pay?” Feuerstein’s plight suggests that in the competitive world of business, at least, you do. But the dean answers with a question: “What is it you don’t have to pay for? What sacrifices are you willing to make to be true to your values?”