Unit 2 understanding business ethics business ethics

UNIT 2
UNDERSTANDING BUSINESS ETHICS
Business ethics is the study of business situations, activities,
and decisions where issues of
right and wrong are addressed.
Business ethics is also known as corporate ethics. It is a form of
applied ethics or professional
ethics that examines ethical principles and moral or ethical
problems that arise in a business
environment.
Business ethics are the values and principles which operate in
the world of business. They form
the moral framework of the organisation.
A business is considered to be ethical only if it tries to reach a
trade off between pursuing
economic objective and its social obligations.
Corporate business executives have a responsibility to their
shareholders and employees to
make decisions that will help their business make a profit. But
in doing so, businesspeople also
have a responsibility to the public and themselves to maintain
ethical principles.
What is Business Ethics ?

3
Four different levels of business ethics can be identified based
on what type of
business and how their actions are evaluated.
1. The society level, which defines ethical behavior and
assesses the effect of
business on society.
2. The industry level, which suggests that different industries
have their own
set of ethical standards (e.g., chemical industry vs.
pharmaceutical industry)
3. The company level, under which different companies have
their own set of
ethical standards
4. The individual manager level, at which each manager and
other corporate
participants are responsible for their own ethical behavior
Why be ethical in business?
4
Goodwill of the business

•People like to build long term relationships with organizations
that perform their tasks on the principles of ethics.
•Following a code of ethics enhances the goodwill of the
organization and organization possess a strong public image.
•Moreover strong public image leads to continual loyalty and
attracts new investors.
Prevention fromlegal action(s)
•Byimplementing ethical practices organizations are
automatically
prevented from illegal and objectionable activities as business
ethics
instruct to avoid all that is wrong or evil.
•Suchorganizations have no fear of legal action and social
boycott.
Ethicalpracticescreatea strong public image
• Organization with strong ethical practices will possess a
strong image
among the public.

• Thisimage would lead to strong loyalty.
• Strong public image results in attracting new investors.
• Ethics practices support employee growth
• Ethics in the workplace helps employees face reality, both
good and bad,
in the company.
• Employees feel full confidence and therefore they can deal
with any
sort of situation.
Strong teamwork and high productivity
• Constant check and dialogue will ensure that the employee
matches
to the value of organization which will in turn results in better
co-
operation and increased productivity.
• Build trust with key shareholders: implementation of ethics
helps
organization to gain trust of their shareholders.
• Shareholders feel confidence that companyis well monitored.

High profits and good governance
• Business ethics create high returns or profits for the company
and its share prices increase if the company acts upon its social
responsibility (CSR).
• Most of the benefits received from business ethics are the
goals of
corporate governance.
• Thus, we can say that ethics have a strong impact on corporate
governance and the implementation of business ethics can
ensure good
governance.
• Customers
• Managers/Owners/Shareholders
• Pressure Groups/Activists
• Workforce
• Community/Society
• Trading Partners
Who cares about Business Ethics?

10
✓ Solidarity
✓ Efficiency
✓ Rationality
✓ Fairness
✓ Refraining from willingly harming others
✓ Role-responsibility
Basic ethical principles for business
Business contributions to the sustainable development (UN
chart)
BUSINESS ETHICS
AND
CORPORATE GOVERNANCE
WHAT IS CORPORATE GOVERNANCE?

The system of rules, practices and processes by which a
company
is directed and controlled.
Corporate governance essentially involves balancing the
interests
of the many stakeholders in a company (shareholders,
management, customers, suppliers, financiers, government,
community).
BENEFITS OF GOOD CORPORATE GOVERNANCE
✓ Improved r eputation
✓ Fewer fines, penalties, lawsuits
✓ Decreased conflicts and fraud
✓ Enhanced p erformance
✓ Access to capital
✓ Better standards
✓ Better talent utilization
Corporate Culture Companies should promote a spirit of
integrity that

goes beyond compliance.
Incentives Individuals within the company tend to act according
to incentives provided to them in terms of rewards
and the performance evaluation process.
Opportunities Effective corporate governance, internal controls,
and
enterprise risk management can reduce the
opportunity for unethical conduct.
Choices Individuals, in general, are given the freedom to make
choices and usually choose those that will maximize
their well-being.
Some hints for effective (internal) Corporate Governance
SOME EXAMPLES OF UNETHICAL
ISSUES IN BUSINESS
• Bribery
Accepting bribe create a conflict of interest between the person
receiving bribe and his organization. And this conflict would
result
in unethical practices.
• Coercion

It is forcing a person to do things which are against his personal
believes. E.g. blocking a promotion, loss of job or blackmailing.
• Insider Trading
(Insider trading is misuse of official position.)
Here the employee leaks out certain confidential data to
outsiders or
other insiders which effect the reputation and performance of
company.
• Conflicts of Interest
Conflict of interest when private interests are important for
employees
which are against the desire of employer.
• Unfair Discrimination
Unfair treatment or given privileges to persons on the base of
race,
age, sex, nationality or religion. It is failures to treat all persons
equally.
• Political Donations and Gifts

Gifts, donations or contribution to political leaders or parties to
get
any unconditional act done e.g. sanctioning of any special
contract,
issue of licenses etc.
• Presentation of false returns of income and statements
It is to prepare false income returns and statements of accounts
for
evasion of tax and getting various govt. benefits and incentives.
• Accumulation of profits by illegal
Sometimes business undertakes various unconstitutional and
unethical and activities to maximize its profits (e.g., black
marketing, speculation etc.)
MAIN CAUSES OF UNETHICAL
CONDUCT IN A COMPANY
1. Pressure to meet unrealistic objectives and deadlines:

According to a recent survey, the pressure from management or
from the
Board to meet unrealistic business objectives is the leading
factor that
causes unethical behavior.
2. Increase in acute competition:
Competition is increasingat national and internationallevel.
Every business
aims to be the highest profit maker.
To achieve this goal, organization/individuals are urged to act
dishonestly
and unethically.
3. Economic Greed:
People have a desire to live a life full of comforts and luxuries.
Some
people follow unethical means to earn more money.
Personal financial worries become a cause for unethical
practices
such as accepting a bribe.
4. Lack of Management Support or Poor Leadership:

- Leader is responsible for motivating his staff.
-If the leader does not encourage his subordinates to be ethical
then
there are higher chances of unethical conduct
-If the leader himself is involved in unethical activities, his
employees may do the same.
5. Pressure to earn profit:
- Shareholders expect larger returns.
- Employees hope for higher salary and benefits
- Directors expect higher remuneration
-Thus there is an increasing pressure to maximize profit to cope
with enlarged requirements.
6. Information of unethical acts through media:
The information given by media provides ideas to
inexperienced businessman for doing unethical activities.
12 Ethical Principles for
Business Executives

26
1. HONESTY. Ethical executives are honest and truthful in all
their dealings and they do not deliberately mislead
or deceive others by misrepresentations, overstatements, partial
truths, selective omissions, or any other means.
2. INTEGRITY. Ethical executives demonstrate personal
integrity and the courage of their convictions by doing
what they think is right even when there is great pressure to do
otherwise; they are principled, honorable and
upright; they will fight for their beliefs. They will not sacrifice
principle for expediency, be hypocritical, or
unscrupulous.
3. PROMISE-KEEPING & TRUSTWORTHINESS. Ethical
executives are worthy of trust. They are candid and
forthcoming in supplying relevant information and correcting
misapprehensions of fact, and they make every
reasonable effort to fulfill the letter and spirit of their promises
and commitments. They do not interpret
agreements in an unreasonably technical or legalistic manner in
order to rationalize non-compliance or create
justifications for escaping their commitments.
4. LOYALTY. Ethical executives are worthy of trust,
demonstrate fidelity and loyalty to persons and institutions
by friendship in adversity, support and devotion to duty; they do
not use or disclose information learned in
confidence for personal advantage. They safeguard the ability to
make independent professional judgments by
scrupulously avoiding undue influences and conflicts of
interest. They are loyal to their companies and

colleagues and if they decide to accept other employment, they
provide reasonable notice, respect the
proprietary information of their former employer, and refuse to
engage in any activities that take undue
advantage of their previous positions.
5. FAIRNESS. Ethical executives and fair and just in all
dealings; they do not exercise power arbitrarily, and do
not use overreaching nor indecent means to gain or maintain any
advantage nor take undue advantage of
another’s mistakes or difficulties. Fair persons manifest a
commitment to justice, the equal treatment of
individuals, tolerance for and acceptance of diversity, the they
are open-minded; they are willing to admit they
are wrong and, where appropriate, change their positions and
beliefs.
6. CONCERN FOR OTHERS. Ethical executives are caring,
compassionate, benevolent and kind; they like the Golden
Rule, help those in need, and seek to accomplish their business
objectives in a manner that causes the least harm and
the greatest positive good.
7. RESPECT FOR OTHERS. Ethical executives demonstrate
respect for the human dignity, autonomy, privacy, rights,
and interests of all those who have a stake in their decisions;
they are courteous and treat all people with equal respect
and dignity regardless of sex, race or national origin.
8. LAW ABIDING. Ethical executives abide by laws, rules and
regulations relating to their business activities.
9. COMMITMENT TO EXCELLENCE. Ethical executives
pursue excellence in performing their duties, are well informed

and prepared, and constantly endeavor to increase their
proficiency in all areas of responsibility.
10. LEADERSHIP. Ethical executives are conscious of the
responsibilities and opportunities of their position of
leadership and seek to be positive ethical role models by their
own conduct and by helping to create an environment in
which principled reasoning and ethical decision making are
highly prized.
11. REPUTATION AND MORALE. Ethical executives seek to
protect and build the company’s good reputation and the
morale of its employees by engaging in no conduct that might
undermine respect and by taking whatever actions are
necessary to correct or prevent inappropriate conduct of others.
12. ACCOUNTABILITY. Ethical executives acknowledge and
accept personal accountability for the ethical quality of
their decisions and omissions to themselves, their colleagues,
their companies, and their communities.
6 Pillars of Business Ethics
Trustworthiness – Honest in conduct (not stealing or cheating),
Integrity, Reliability (promise-
keeping) and Loyalty
Safeguard public confidence in the integrity of the organization
by displaying honesty in all
dealings and avoiding conduct that might create the appearance

of impropriety. Go beyond
what is legally required to permit public scrutiny of your
activities.
Respect – Civility (courtesy and decency), Autonomy and
Tolerance
Treat others with dignity – the way you would like to be treated.
Be civil, courteous and decent
with all employees, customers and business partners.
Responsibility – Accountability, pursuit of excellence
(diligence and perseverance) and self-
restraint. Conduct business efficiently and honorably in a
manner that permits employees,
suppliers, vendors, customers and members of the local
community to make informed
judgments and hold the company accountable.
Fairness – Impartiality and Equity
Seek to be impartial; employ independent objective judgment on
merit, free from conflicts of
interest – both real and apparent. Compensate all employees
equitably; minimize wage
disparities.

Caring – Charity and Compassion
Demonstrate a genuine sense of compassion and concern for the
welfare of others – inside and
outside the company walls. Don’t allow tax advantages to
dictate charitable contributions from
the company. These are maneuvers, not contributions.
Citizenship – Volunteerism (doing your share), Environmental
protection and Law abidance
Honor and respect the principles and spirit of democracy and set
a positive example by
observing the letter and spirit of laws. Demonstrate a
commitment to the environment and to
social responsibility that goes beyond legal requirements.
31
How to empower Ethics at an
organizational level?
32
Treating employees equitably enables substantial organizational
benefits while avoiding unethical
operations and the corresponding consequences.

To ensure an organization is fair, one must consider the concept
of justice as a central pillar of what
creates a fair environment (and what does not). The question is
simple: how do employees perceive
the behavior of the organization, and how does this impact both
employee and organizational
outcomes?
In answering these questions, there are three useful perspectives
one can adopt in considering
fairness in the organization:
Distributive – Simply put, the distribution of resources should
align with the value of an individual’s
inputs. Of course, this is more complex than salary. As a
manager, ensure that credit, bonuses, and
benefits are also distributed fairly.
Procedural – Employees don’t only want compensation. They
also need input into the process, and
shared accountability in the decisions being made. When
designing the procedure of a given work
group, inclusion of everyone’s perspectives can lead to
substantially higher satisfaction, efficiency,
and fairness.
Interactional – All members of an organization must both be
treated appropriately (from a social
frame) and informed respectfully (from an informational frame).
In short, employees should be
treated with propriety in discussions and shouldn’t be left in the
dark when important decisions are
made.
Fairness

There are many overt and subtle outcomes of treating employees
equitably. The simplest
examples of positive results due to a strong sense of ethical
fairness in an organization include:
Higher Performance and Efficiency – People feel their input is
aligned with their
compensation
Commitment – Happy employees tend to stick around.
Citizenship – If there is inequity in how people are treated, it
tends to divide them. This is
incredibly dangerous, and can quickly erode the positive
benefits of looking out for one another.
Avoiding Counterproductive Behavior – In short, dissatisfied
employees are more prone to
working against the established goals of the organization.
Behaviors such as not doing certain
tasks or helping certain work-groups can quickly become a
source of inefficiency.
Absenteeism – Sick days, skipping meetings, and generally
unplugging from the organization
is often an outcome of inequitable organizatio ns.
Emotional Exhaustion – Unsatisfied employees wrestle with
insecurity and dissatisfaction,
both of which are emotionally draining.
Implications of Fairness

Transparency consists of operating in such a way that it is easy
for others to see what actions
are being performed.
For example, a cashier making change at a point of sale by
segregating a customer’s large bills,
counting up from the sale amount, and placing the change on the
counter in such a way as to
invite the customer to verify the amount of change demonstrates
transparency. Radical
transparency is a management method where nearly all decision
making is carried out publicly.
All draft documents, all arguments for and against a proposal,
all final decisions, and the
decision making process itself are made public and remain
publicly archived.
Corporate transparency, a form of radical transparency, is the
concept of removing all barriers
to—and the facilitation of—free and easy public access to
corporate information. This includes
the laws, rules, and processes that facilitate and protect those
individuals and corporations that
freely join, develop, and improve the process.
The transparency that occurs as a result of open communication

protects against potential
abuses of power and makes for a safer environment overall.
Open Communication of Decisions
All organizations, regardless of their mission (e.g., profit
oriented, nonprofit) and size (large vs.
small), should establish an “Organizational Ethical Culture.”
that means:
• Organization, which is defined as a group of individuals or
entities bound to achieve a
shared goal;
• Ethics, which is honorable behavior conforming to the norm of
the group;
• Culture, which is a pattern of shared beliefs adopted by the
group in dealing with its
internal and external affairs.
These help to minimize problems with conflicts of interest
because they spell out the extent to
which such conflicts should be avoided, and what the parties
should do where such conflicts are
permitted (disclosure, recusal, etc.). Thus, professionals cannot
claim that they were unaware

that their improper behavior was unethical. As importantly, the
threat of disciplinary action (for
example, a lawyer being disbarred) helps to minimize
unacceptable conflicts or improper acts
when a conflict is unavoidable.
Codes of Ethics
How to empower Ethics at an individual
level?
• At the individual level, organizations must focus on
developing and empowering each
employee to understand and adhere to ethical standards. There
are four basic elements
organizations can build to empower individual ethics:
• A written code of ethical standards (ethical code)
• Training for management and employees (ethical training)
• Advice and consulting on a situation to situation basis (ethics
officers)
• A confidential and easily accessible system of reporting
(ethical reporting)

• Equipping organizations with these four components can
alleviate much of the burden on the
individual, and enable each employee to learn what is
appropriate (and what isn’t).
Structure
As with most facets of management, there is also a critical
motivational component to individual
ethics. Intrinsic and extrinsic motivations can reinforce positive
behavior and/or eliminate negative
behavior in the workplace.
Whistleblowing, for example, is a practice that gets quite a bit
of both positive and negative media
attention. Whistleblowers are individuals who identify unethical
practices in organizations and report
the behavior to management or the authorities. A whistleblower
who behaves honestly, reporting a
problem accurately, should be rewarded for their bravery and
honesty, as opposed to punished and
ostracized. If an employee is blowing the whistle, it is likely
that the organization itself has failed to
empower and positively reinforce honest and ethical discussions
internally.
Another example is rewarding employees for admitting
mistakes. An employee who makes a mistake
on the assembly line, and accidentally produces a batch of
defective goods, could react in a number
of ways. If the organization punishes employees for mistakes,
the employee is quite likely to be
motivated to keep quiet and not mention it to avoid punishment.

However, if the organizational is
ethical and clever, they will empower employees to take
responsibility for their mistakes and even
reward them for coming forward, apologizing, and ensuring that
no consumer receives a defective
product. It seems at first counter-intuitive to reward an
employee for a mistake, but ultimately it
provides the best outcome for everyone.
Motivation
Finally, some aspects of individual ethics are rooted in the
individual. Attaining a strong sense of
professionalism, and recognizing the ethical implications of
certain professional decisions, is a
key component of education, individual reflection, and
experience. For some professions it is
even more critical and relevant than others.
Journalists, for example, could easily attain higher notoriety for
making up false stories about
celebrities to gain traffic to their news website. But an ethical
journalist recognizes the
repercussions of slander for the individual being discussed, and
maintains an honest ethical
code of reporting only what they know to be true (and not what
they speculate). Psychologists

will maintain patient privacy, understanding the repercussions
of leaking personal information
about their patients.
There are many potential examples, but the primary point is that
professionals understand the
their field deeply, including the repercussions of making ethical
mistakes.
Professionalism
A situation in which someone in a position of trust has
competing professional or personal interests is known as a
conflict of interest.
A conflict of interest can exist even if there are no improper
acts that result from it. One way to understand this is to use
the term “conflict of roles”.
These are some of the most common forms:
Self-dealing, in which an official who controls an organization
causes it to enter into a transaction with the official, or
with another organization that benefits the official, i.e., the
official is on both sides of the “deal”.
Outside employment , in which the interests of one job
contradict another.
Family interests, in which a spouse, child, or other close
relative is employed (or applies for employment) or where
goods or services are purchased from such a relative or a firm

controlled by a relative. For this reason, many
employment applications ask if one is related to a current
employee. In this event, the relative may be recused from any
hiring decisions. Abuse of this type of conflict of interest is
called nepotism.
Gifts from friends who also do business with the person
receiving the gifts (may include non-tangible things of value
such as transportation and lodging).
Pump and dump, in which a stockbroker who owns a security
artificially inflates its price by “upgrading” it or spreading
rumors, sells the security and adds short position, then
“downgrades” it or spreads negative rumors to push its price
down.
Other improper acts that are sometimes classified as conflicts of
interests may be better classified elsewhere: e.g.,
accepting bribes is corruption; the use of government or
corporate property or assets for personal use is fraud; not
conflict of interest.
About the Conflicts of Interest
Ethical issues may vary from one organization to another
according to the
factors influencing the ethical behavior:
▪ conflicts of interest,
▪ quality control issues,
▪ discrimination in hiring and promotion,

▪ misuse of proprietary information,
▪ abuse of company expense accounts,
▪ misuse of company assets,
▪ drug and alcohol abuse,
▪ environmental pollution, environmental destruction,
▪ etc.
Examples of internal Ethical Issues
• Should firms use child labour?
• Is animal testing needed in products and ingredients?
• What wages should firms pay to poor countries?
• To what extent should firms seek to be environmentally
friendly?
• Should firms get involved in certain activities (e.g., making
weapons)?
• Should a firm relocate to a country paying lower level of
wages?
• Should a firm release a life-saving drug after limited testing?
• Should advertising aimed at children be restrained?
Common ethical issues in business running:

✓ Sense of employee responsibility.
✓ Freedom to raise concerns without fear of retaliation.
✓ Managers modeling ethical behavior and expressing the
importance of
integrity.
✓ An understanding by leadership of the pressure points that
drive unethical
behavior.
✓ Processes to find and fix these areas of pressure.
What are the key attributes of an ethical (business) culture?
✓ Comply with a written code of business conduct.
✓ Provide sufficient training to all personnel within their
organization regarding personal responsibility
under the code.
✓ Encourage internal reporting of violations of the code with
the promise of no retaliation for such
reporting.
✓ Self-govern their activities by implementing controls to

monitor compliance with all applicable laws and
regulations.
✓ Share their best practices through participation in an annual
forum.
✓ Be accountable to the public, particularly through the
completion of an annual questionnaire.
What are the success principles for business ethics
and ethical conduct?
Case study:
A secretary who has worked for your corporation for fifteen
years is involved in a car accident in which she
permanently loses the use of her right hand. Thus, she can no
longer effectively type, file, or perform
many of the other functions that she previously had performed
and that are included in her job description.
Your corporation has a very tight budget and does not have
sufficient funds to pay for an additional
secretary without reallocating budget items. The injured
secretary has been very loyal to your corporation,
and you have been very satisfied with her work and dedication.
She wants to stay at her job.

Moreover, she does not believe that she could find other
employment at this time.
Should your corporation fire her, lay her off with compensation,
or find a way to retain her? In resolving
this dilemma, apply:
– Utilitarianism
– The Rights Model
– Your own personal opinion
When resolving Ethical Dilemmas:
• Step One: Analyze the consequences.
– Consider short vs. long run
– Consider benefit vs. harm
• Step Two: Analyze the actions.
– Are they fair, equal, honest, respectful?
• Step Three: Make a decision.
– Can you live with the outcome?
Questions that help in resolving Ethical Dilemmas:

• What are the facts?
• What can you guess about the facts you don’t know?
• What do the facts mean?
• What does the problem look like through the eyes of the
people involved?
• What will happen if you choose one thing rather than another?
• What do your feelings tell you?
• What will you think of yourself if you decide one thing or
another?
• Can you explain and justify your decision to others?
.
“Leadership is the process of influencing people…” This is a
fundamental concept from ADRP 6-22 we are all familiar with.
While influence might be the essence of leadership, it is not the
start point. It all begins with power, the capacity an individual
has to influence the attitude or behavior of others. Influence
without power is like a car without an engine—no matter how
good it looks, it still won’t get you anywhere. This lesson
focuses on understanding the interrelationship of six critical
concepts: power, influence, commitment/compliance, influence
tactics, emotional intelligence, and leadership styles. A critical
leadership thread runs through each of these concepts and, if
inculcated into your thinking, will make you very effective
organizational-level leaders.
Our case study to illustrate these ideas is from the American
Red Cross. The president of the organization in 2001 was Dr.
Bernadine Healy, one of the most talented and successful

leaders in the field of American medicine; a woman with the
attitude and drive that would be the envy of any Sergeant
Major. In her two years at the Red Cross, she unerringly
identified critical organizational shortfalls and the necessary
fixes to modernize this American institution. The result of her
actions? She was fired. By studying the context of Dr. Healy’s
situation and the events leading to her dismissal, you wi ll better
understand the relationship between power and influence, and
how it can be harnessed to change attitudes, beliefs, and
behaviors of followers to gain commitment within an
organization.
L201-RA-1
US ARMY SERGEANTS MAJOR ACADEMY
Sergeants Major Course (SMC)
L200: Developing Organizations and Leaders
Lesson Plan for L201
Organizational Power and Influence
L 1 Reading A:
The Application of Power and Influence in Organizational
Leadership
1
1 By Dr. Gene Klann. Reproduced by and for the USASMA
(2010)

L201-RA-2
For the uninformed, military leadership is all about giving
orders and expecting instant obedience.
Followers of this mental model believe if there is any hesitation
in compliance from Soldiers, they will
inevitably be punished or even thrown in the brig.‖ This was
best epitomized in a discussion I had
when assigned to NATO with Dr. Michel Liu, a noted
sociologist and professor at Paris-Dauphine
University. He felt leadership in the military was all about
enforcing compliance, and no need existed for
more advanced influencing skills. It was his opinion that
military leaders merely relied on rank, position,
service rules, and regulations to get things done, and military
leadership was really a myth! We wish it
was only that simple.
Military leaders are responsible for achieving any and all
assigned missions. That is the expected
result or outcome of their leadership. They can do this through
either commitment or compliance-focused
influence. Compliance-focused is directed at follower behavior.
It is generally effective for gaining
short-term and immediate results. It also works well in time-
constrained environments with basic tasks
that require a specific action or behavior, and there is little need
for follower understanding.
Noted leadership researcher Peter Senge
believes ninety percent of the time what
passes for employee commitment is really
compliance.1 According to Senge, there
are various levels of compliance ranging

from genuine compliance to
noncompliance. In genuine compliance the
followers do what is expected and are
considered good employees. During
routine operations, genuine compliance
may be all that is required to successfully
accomplish the mission. In grudging
compliance employees make only
minimum effort and their heart is really not
in it. They only do the least amount of
work because they have no personal
ownership or buy-in. They are really not convinced the leader’s
decision or action is the best one, that it
will be effective, or that it is even worth doing in the first
place.2 They also have no problem letting others
know they are not on board.
Long-term and lasting change requires a different focus.
Leaders must move beyond compliance-
prompted behavioral changes and focus on influencing follower
attitudes, beliefs, and values in order to
gain commitment. Commitment implies the followers want the
organization to succeed and positive
changes to occur. Committed followers make a decision to take
personal ownership of mission tasks,
have internal buy-in to the leader’s decisions and orders, and
proactively dedicate themselves to mission
accomplishment. They feel a shared responsibility for the
successful completion of the task at hand. It
could be said that both their mind and heart are really in it.‖
The critical point is that the commitment is
self-initiated. It is a cognitive, thought-based process. The
leader can create an environment that
promotes and encourages follower commitment but the bottom
line is that the individual must make a
personal, internal, thought-out decision to fully sign on to the

mission.
A historical example of the contrast between follower
commitment and compliance can be taken from
the experience of Major General George Armstrong Custer.
During the American Civil War, Custer had
the total commitment of the highly motivated volunteers he
commanded in the 3rd Michigan Cavalry
Compliance vs. Commitment
Compliance: Conforming to a specific requirement or demand
Commitment: Dedication or allegiance to a cause or
organization
Compliance
&
Commitment
- FM 6-22
Change in
behavior
Change in
thinking
L201-RA-3
Division. He was convinced he could accomplish any mission

with these troops, and had a proven track
record of success during the war. This was quite different from
the troopers he later commanded in the 7th
Cavalry Regiment during the American Indian Wars. These
Soldiers were generally from the lower
elements of society and some were even former criminals.
Many were immigrants who could barely
speak English or even ride a horse. They had joined the Army
simply to have a job. Custer was
constantly frustrated with them and, to gain their compliance,
reverted to extremely harsh disciplinary
measures to include executions. This lack of commitment in his
Soldiers impacted their level of
competence and was one of many factors that contributed to
Custer’s devastating defeat at the Little
Bighorn.
The challenge for the organizational-level leader is gaining this
commitment from subordinate leaders
and followers for the health and future of the organization.
How do they do it? It all begins with power.
POWER
A core tool or means the leader can leverage to gain follower
commitment is the power available to
them. We define power as the capacity to influence others and
implement change. It is not the actual
influencing action. Influencing is the application of power.
Without power, there is little influencing;
and with no influencing, there is no opportunity to gain genuine
compliance or commitment from others.
The practical question must then be
asked, What are the sources of a leader’s
power?‖ According to Dr.’s Gary Yukl

and Cecelia M. Falbe, there are two
independent sources of power: position and
personal.3 The first is the authority that
comes from the position the leader is
filling. This gives them position or
positional power. With this form of power
comes the authority of the position.
Position power promotes follower
compliance. The second source of power
is personal power. This power comes from
the leader’s followers and is based on their
trust, admiration, and respect for the leader.
It is tied to the leader’s expertise and
personality. Personal power encourages and connects with
follower commitment.
Position Power
Position power is derived from a particular office or rank in a
formal organization. According to
taxonomy of social psychologists John R.P. French and Bertram
Raven, it can be divided into further
subcategories such as legitimate, reward, and coercive.4 When
this power is applied through the use of
appropriate influence techniques,* it can be very effective in
changing the behavior of followers. In other
words, it is excellent in gaining compliance.
* ADRP 6-22, Army Leadership, uses the term influence
techniques.‖ The majority of the professional leadership
community uses the term influence tactics‖ coined by
University of Albany researcher and professor Dr. Gary
Yukl. I use both terms interchangeably in this article.
Power

The capacity an individual has to influence
the attitude or behavior of others
POSITION
POWER
PERSONAL
POWER
• Coercive
• Legitimate
• Reward
• Information
• Expert
• Referent
Compliance
&
Commitment
8
L201-RA-4
Legitimate power comes from the leader’s formal or official
authority. Individuals with legitimate

power influence others through orders and requests that are
consistent and appropriate with their position.
In the exercise of legitimate power, the followers respond
because they believe the leader has the right to
make requests or give orders, and they have an obligation to
comply.
Command is a form of legitimate power. According to ADRP
6-22, Army Leadership, “command is the
authority a commander in the military service lawfully exercises
over subordinates by virtue of rank or
assignment.‖5 It grants military leaders both the right and
obligation to make decisions, give orders, and
exercise control of resources such as budgets, equipment,
vehicles and other assigned materials.
Trappings of legitimate power may include office size and
layout; professional assistants, drivers; and
aides; uniform insignia and accouterments; and so on.
Reward power involves the capacity of leaders to use highly
desired resources to influence and
motivate their followers. These include promotions; selection
for special duties, activities, or privileges;
"be st‖ competitions; medals; letters of appreciation or
commendation; and so on. On a lesser but still
significant scale, the reward could be public or private verbal
praise, a thank you note, time off, an
intercession on another’s behalf, or a simple recognition by
handshake or personal acknowledgment.
When soldiers realize their leaders in the chain of command
know who they are, it can be highly
motivational. In reality, the rewards leaders generate for
followers are limited only by their creativity and
originality.
Coercive power is the opposite of reward power. Whereas

reward power offers something positive
and desirable, coercive power presents something negative and
undesirable. As the old quote says, I t is
the difference between gain and pain.‖ Coercive power is the
capacity to influence others through
administering negative sanctions such as punishments, removal
of privileges, fear tactics, public
embarrassment, or being placed in a bad light among one’s
peers. Coercive power has been traditionally
associated with the military and stereotypical toxic military
leaders. Countless movies have been made
depicting military leaders of all ranks and particularly drill
sergeants using coercive power tactics.
American General Joseph Vinegar Joe‖ Stilwell commanded in
the China-Burma-India Theater in
World War II and was known for his demanding nature and
caustic remarks. He excelled in the use of
coercive power tactics. One of his British brigade commanders,
John Masters, recalled Stilwell
specifically detailing a staff officer to visit subordinate
commands to chastise their officers for being
y ellow.‖ 6 Obviously there was some truth to the nickname
Vinegar Joe.
Coercive power has serious limitations and disadvantages. It
may bring temporary compliance but
undermines long-term commitment. It could result in passive-
aggressive behavior, retaliation, and formal
complaints against the chain of command leading to disciplinary
or relief actions.
An additional form of position power described by Yukl is
information power. It includes access to
critical information, control over its dissemination, and the
ability to act on that information. Based on
rank and position, organizational leaders routinely have access

to information that subordinates do not.
Thus a leader who controls the flow of information has the
opportunity to interpret events for
subordinates and influence both perceptions and attitudes.7
Leaders can present information anyway they
like and even distort it to their advantage. They may do this to
cover up mistakes, bad decisions, or
potential failures. Information is also vital in crisis situations
because it is essential to the emotional well
being of those being led. When information is not readily
available, many followers will inevitably
M SU‖ it mean make stuff up.‖ What they make up generally
will be better than reality though the
consequences will be much worse.
Personal Power
L201-RA-5
In additional to positional power, leaders can also leverage
personal power. Personal power is
derived from the followers based on their trust, admiration and
respect for the leader. It is the power
given to the leader by the followers based on the leader’s
personality or expertise. It can be subdivided
into two categories: expert power and referent power. When
this power is applied through the use of
appropriate influencing techniques, it can be very effective in
gaining commitment in others. This is
because it allows the leader to influence not just the followers’
behavior but their thinking as well through
an appeal to personal attitudes, beliefs, and values. It is
important to remember that followers can
withdraw this power just as easily as they give it. Whereas

position power encourages follower
compliance, personal power promotes follower commitment
with the use of proper influence tactics.
Expert power is based on the knowledge and expertise one has
in relation to those being led. It is
being the subject matter expert or SME. The more knowledge,
skills, talents, and proficiencies leaders
have, the more power they can leverage. Those selected for
battalion command successfully served in
KD jobs such as a battalion XO or S3. These jobs should have
provided the knowledge and expertise
essential for their success as a battalion commander. The
challenge at the organizational level is that
there may be many individuals in a battalion possessing more
expert power than the battalion commander.
This could include assigned warrant officers, various
noncommissioned officers, and those whose
assignments have given them special knowledge or experiences.
Part of leveraging expert power, is the
leader’s effective utilization of all available expert resources to
accomplish the mission.
Post World War II research studies indicate that junior enlisted
Soldiers had much more confidence in
their noncommissioned officers than in their commissioned
officers, i.e. platoon leaders. Understandably,
this was because of the experience the NCOs possessed in
comparison to the lieutenants, experience the
Soldiers felt would keep them alive.8 This was expert power in
its highest form.
The second category of personal power is that of referent
power. Leaders can offset a lack of expert
power by leveraging their referent power. Referent power
refers to the strength of the professional

relationship and personal bond leaders develop with their
followers.9 When followers admire leaders and
view them as role models or even friends, they imbue them with
referent power. People will work hard
for such leaders simply because they want to look good in their
eyes and not let them down. To put it
another way, referent power is the power generated by
relationships the brick and mortar of solid
organizations. The stronger the relationship, the higher the
probability things will get done and get done
well. Also, referent power has the highest potential of all the
forms of power to gain a strong
commitment from the followers.
General Dwight D. Eisenhower had exceptional interpersonal
skills. Despite the fact that he did not
deploy overseas in World War I, serve in combat, or command a
unit larger than a battalion, he was
selected in 1942 by President Roosevelt and General Marshall
to be the Commanding General, European
Theatre of Operations. This appointment was due as much to
his relational skills as his professional or
administrative competencies. Eisenhower did not disappoint.
Through his interpersonal and social skills,
he was able to gain the trust and confidence of both the allied
and U.S. military and political leaders.
Though he had fundamental disagreements with Churchill and
other allies, it did not seem to affect their
relationship.
INFLUENCE
Influence is the application of power. Leaders can use their
power to affect and change the behaviors,
values, attitudes, morale, and commitment level of those they
lead. The research of Dr. Gary Yukl

indicated the application of the leader’s power comes
principally through a variety of influence tactics
(influencing techniques).10 The type of influence tactics
applied to a given situation depends on the
L201-RA-6
amount of power the leader has, the target group being
influenced, the degree of resistance expected, and
the rationale behind the various influencing tactics.11
Influence tactics can be placed into three broad
categories: hard, soft, and rational tactics.12
Influence Tactics
Hard tactics are generally associated
with positional power and include
coalition, legitimate requests, and pressure.
They are very effective at gaining follower
compliance. They are generally used
when the leader is expecting significance
resistance, the leader or influencer has the
upper hand, or when the person being
influenced violates the protocols of
appropriate behavior with the leader.
leader asks for the assistance or
support of others to influence the
target. It may include getting the endorsement of someone the
target person likes, respects, or
views as an expert. Coalition tactics are routinely used in
combination with one or more other
influence tactics such as rational persuasion, ingratiation, or

apprising. It can also be described as
g anging up.‖ This tactic can make the target extremely
uncomfortable.
leader makes requests based on their
rank, position, or authority. The leader first establishes his or
her authority as part of the request
process. It is generally used when the request is unusual,
resistance is expected, or the target
person may not know who the leader is or what authority she
has.13 This is a tactic that is best
used sparingly as it loses its impact and effectiveness if
overused. Pu ll ing rank‖ is a type of
legitimizing tactic.
reminders, persistent demands, constant
checking, bothersome micromanagement, and other aggressive
behaviors from the leader. These
tactics are generally used if the commitment of those being led
is low and compliance is an
acceptable alternative. The problem with pressure tactics is that
they have the tendency to
undermine relationships. They may be effective in the short
term but generally have a negative
long-term effect. Pressure tactics are closely associated with
the pre-volunteer military and also
Hollywood’s stereotype of military leaders. Experience has
shown that, overall, pressure tactics
have very low effectiveness.
Soft tactics are associated with personal power and include
ingratiation, personal appeal,
inspirational appeal, participation, relational, and building
consultation. All are effective at gaining

follower commitment or at least placing the follower in a
position where they are more willing than not to
commit to an action or change. Besides the focus of gaining
commitment, they can be used when the
influencer is at somewhat of a disadvantage, when they expect
minor resistance, or when they will
personally benefit if the influencing effort is a success.
influenced feel better about the
leader and the request he or she is about to make. Ingratiation
is done by giving praise, acting
Influence: The Application of Power
POSITION
POWER
PERSONAL
POWER
Compliance
&
Commitment
Influence Techniques
Hard Rational Soft
- Coalition
- Legitimate requests
- Pressure

- Ingratiation
- Personal appeals
- Inspiration
- Participation
- Relationship building
- Consultation
- Rational persuasion
- Exchange
- Apprising
- Collaboration
L201-RA-7
friendly, giving unexpected favors, or saying things to make
those being influenced feel special or
be in a better mood. Sales representatives use ingratiation as
one of their primary influencing
tactics. Another common phrase for ingratiation is s ucking
up!‖ In a World War II period
cartoon by Bill Mauldin, infantryman Willie says to his buddy
Joe, The Captain was acting real
friendly this morning. Guess that means we’re moving back up
to the [front] line again.‖ The
captain’s action was a form of ingratiation. While the word

ingratiation‖ has a negative
connotation, it can be effectively used in moderation, for
example, when meeting new people and
attempting to make a good first impression. If successfully
employed, it will increase the referent
power of the user.
loyalty, or trust. It generally occurs
when the leader is faced with a difficult situation and mutual
trust and confidence are essential to
their success. The leader would appeal to the follower by
highlighting the special skills or talents
he or she has that would insure the task would be successfully
accomplished. Personal appeals
are directly connected to referent power. Many times they are
made when the task is not part of
the person’s normal duties or responsibilities.
emotions and enthusiasm in
others to gain their commitment. It appeals to the target
audience by connecting the request to a
person’s values, needs, hopes, and ideals. Examples would be
the commander’s speech before
the big battle or a coach’s speech to the team before the big
game. To effectively use this
influence tactic, the leader must clearly understand the hopes,
dreams, and values of those being
influenced. Leader’s can use imagery, metaphors, and rousing
animated gestures in the process
of the appeal. However, this must be consistent with how the
leader is generally viewed. If it is
not, it will come across as phony and inauthentic and could
have the reverse effect of what was
intended. During World War II, General Patton would routinely

travel to his army’s subordinate
units and give rousing inspirational appeal speeches. This was
realistically captured on film in
the 1970 academy award-winning movie Patton. In the movie’s
opening scene George C. Scott,
acting as Patton, gave a stirring inspirational speech that was in
fact drawn from the Patton
historical archives.
a mission should be accomplished,
a task carried out, or a difficult change implemented. This is
done to leverage the expertise and
knowledge of the target person as well as gain a higher level of
commitment for the project.
There are situations in which the leader already knows what he
or she is going to do and
consultation is really a subtle form of manipulation. But this is
not true in all cases. There are
times when the expert power of subordinates is needed to insure
the plan is solid. An example of
this was in the movie, Saving Private Ryan. Prior to the film’s
final battle, Captain John Miller
(Tom Hanks) asked Sergeant Mike Horvath (Tom Sizemore)
what he thought they should do. It
was the only time in the movie when he called Sergeant Horvath
by his first name. This is a
classic consultation technique.
part in a planning, brainstorming,
problem solving, consensus building, or decision making
process. Unlike with the consultation
tactic, the follower does not have any unusual expertise on the
topic. The participation generally
increases the follower’s personal sense of value and worth to

the organization. This recognition
is important in building follower commitment and increasing
their ownership and buy-in. Since
the follower has participated in the planning or problem solving
process, this tactic also enhances
the enabling and empowerment process.
L201-RA-8
positive rapport and a relationship of
mutual trust, making followers more willing to support requests.
Examples include showing
personal interest in a follower’s well-being, offering praise, and
understanding a follower’s
perspective. This technique is best used over time. It is
unrealistic to expect it can be applied
hastily when it has not been previously used. With time, this
approach can be a consistently
effective way to gain commitment from followers.
Rational tactics are associated with both personal and
positional power and include rational
persuasion, exchange, apprising, and collaboration. These
tactics are generally used when the two parties
of are equal rank or power, when no resistance is expected, or
when both the organization and the
influencer will benefit. These tactics initially appeal to
compliance but can lead to commitment because
they typically generate short-term wins that can, if consistentl y
applied, sway the attitudes and beliefs of
the followers or targets.

effective influencing techniques.
It commonly uses logical arguments, facts, details, specific
evidence, data, and various forms of
proof to convince the target audience. Rational persuasion is
commonly used by lawyers in legal
arguments. It focuses on one’s reason, rationale thought, and
common sense. It is perhaps the
most difficult to counter and can also be effectivel y used by
subordinates when attempting to
influence their leaders. At the Pacific Strategy Conference in
Hawaii in July of 1944, General
Douglas MacArthur masterfully used rational persuasion to
influence President Franklin
Roosevelt regarding the strategic way ahead in the Pacific War.
With Admiral Chester Nimitz
present, MacArthur skillfully outlined to the President why
liberating the Philippines made more
sense than the navy’s recommended strategy of bypassing those
islands and advancing on
Formosa. Roosevelt decided in favor of MacArthur’s strategic
approach, which was somewhat
surprising since he was a strong advocate of the navy, sea
power, and had previously been
Secretary of the Navy. Such was the strength of General
MacArthur’s rational persuasion.
The leader knows the subordinate
wants or desires something that is highly valued by them. As a
result the leader will give them
what they want if the subordinate will comply with a request
from the leader. This tactic will
only work if what the subordinate is promised is of value to
them, and they believe the leader
doing the promising can and will follow through. Exchange is
quite common in politics. One

elected official will vote for a law if they are promised
something in value by another
representative in return for their vote. Former U.S. Senator Bob
Dole, R-Kansas, a thrice
decorated World War II 10th Mountain Division veteran, was a
master of this tactic during his
twenty-seven years in the Senate.
complying with his or her request will
benefit the target personally or professionally or both. Not
unlike rational persuasion, this often
involves logic and facts. In apprising, the person being
influenced will receive a certain benefit
by doing what the leader is requesting. It is not, however,
something the leader will provide.
That is just the opposite of exchange tactics in which the person
being influenced is being
provided something by the leader. The benefits of apprising
may include increased opportunities
for advancement, greater visibility to influential people, highly
desired skill training, the selection
for special duties, activities, or privileges, and the like.
the resources, equipment, or
assistance that will be needed to successfully complete a
request. This would be resources that
the person being tasked may not have. In collaboration there is
a joint effort by both the leader
L201-RA-9
and the target to accomplish a mission or task. An example in

an operational environment would
be the senior commander offering additional artillery, air, or
armor resources to the subordinate
commander in the support of a very tough offensive action.
Given the forms of power a leader possesses, positional
and/or personal, how does the leader know
what influencing techniques to use? What happens if a leader
with positional power but no personal
power attempts to use a soft influencing technique? Probably
not very much will happen. Imagine a boss
you dislike or do not respect attempts to influence you through
an inspirational speech or a personal
appeal. You would probably find the actions somewhat
offensive and quickly identify the insincerity.
If a leader who has personal power uses a hard influencing
technique, it might not be well received by
the followers. It will seem out of place and the followers will
probably ask, W hat’s wrong with the boss
today? He must have had a fight with his wife!‖ Many leaders
will avoid using hard tactics in fear of
jeopardizing the referent power they already have with their
followers.
Some leaders have various forms of power but do not have the
will to use them. This is generally
because of a lack of moral courage. Some leaders apply the
correct tactic to the correct form of power
but, because it is done so ineffectively, no one is influenced.
Then there are other leaders who do not
understand either power or influence and therefore do not
properly leverage any of these leadership tools
available to them.
Emotional Intelligence

How can the leader insure that the
appropriate form of power and influence
tactics are used in a given situation? It is
through the use of emotional intelligence
ability or skill to identify, assess, manage,
and control the emotions of one’s self, of
others, and of groups.14
…
L201 Reading B 1
US ARMY SERGEANTS MAJOR ACADEMY
Sergeants Major Course (SMC)
L200: Developing Organizations and Leaders
Lesson Plan for L201
Organizational Power and Influence
Reading L201RB
Who Brought Bernadine Healy Down?1
The vast, empty foyer of the American Red Cross's stately
headquarters in Washington seemed as
remote from ground zero as white marble from rubble. That was
my inescapable, if facile, thought as I
glided up the Tara-like central staircase one morning in early
November. The holy hush was misleading,
though. It gave no hint of the passionate, even viperous intrigue
that was playing out behind closed
doors. At a moment when the Red Cross was supposed to be

absorbed with ministering to a nation in
crisis, it was confronting an internal crisis of its own making.
It had been just over a week since Dr. Bernadine Healy, 57, had
announced her resignation under
pressure as Red Cross president. I sat waiting for her in the
president's office wing, which was still her
domain but increasingly provided her little sanctuary. Healy,
baldly showcasing her impatience toward
Red Cross sanctities about tradition, had long displayed a
saying attributed to Clara Barton above the
mantle: ''It irritates me to be told how things have always been
done. . . . I defy the tyranny of precedent.''
Sweeping into the room, Healy sank into a cranberry-colored
chair and exhaled. Healy is a fine-
boned, exquisitely tailored woman who, with her crisp blond
coif and colorful blazers, looked more like
the Republican senator she once aspired to be than a
cardiologist who ran a humanitarian organization.
That day, she was showing the jittery strain of the previous two
months, in which she first commanded a
huge disaster-relief effort and then suffered the humiliation of
rejection by the Red Cross's 50-member
board of governors. Under her severance agreement, Healy was
supposed to stay on through year's end
while the general counsel, Harold J. Decker, took over as acting
C.E.O. But it was already getting pretty
uncomfortable.
''I can't believe it,'' she said, a great sigh collapsing her small
frame. ''They've just fired my chief of
staff. Poor Kate. They gave her a few hours to pack up and be
gone. They want to get rid of us that
badly?'' Over the next couple of hours, there were many knocks
at the door and sniffles outside it as

Healy's assistants were reassigned, a first step toward their
eventual firing. Healy, who had spent the
previous day at a grueling Congressional subcommittee hearing,
was agitated. She believed that the Red
Cross might be seeking to deflect criticism -- and avoid self-
criticism -- by scapegoating her. She could
feel it coming, she said. The board was going to reverse course
and blame unpopular decisions on her.
Healy decided that day to pack up her office and return to her
Ohio home as soon as possible.
It was a terribly intimate moment to observe, and Healy later
said that she regretted I had been there.
Her eyes watery, Healy had stared at a portrait of Barton, her
heroine, who founded the American Red
Cross in 1881. ''You know Clara Barton was fired, too,'' she
said, coughing up a dry laugh. ''The
difference is, she lasted 20 some years and I only lasted two.
They got her on a trumped-up charge that
she used lumber left over from a disaster recovery program in
her home. It tarnished her reputation,
although history ultimately redeemed her.'' Healy paused,
hearing herself. ''Not that I'm Clara Barton.''
She shook her head and rolled her eyes. ''Far from it.''
The Red Cross has come a long way since Barton established it
''to afford ready succor and assistance
1 By Deborah Sontag and reproduced by permission and may
not be further reproduced - New York Times Magazine – 23
December 2001
L201 Reading B 2

to sufferers in time of national or widespread calamities.'' It
now generates about $3 billion in revenues a
year as a quasi-governmental bureaucracy with a split
personality. On the one hand, it is what Barton
intended, a nonprofit disaster-relief organization, and that
chapter-based service side gives the Red Cross
its identity as an icon of volunteerism. But the Red Cross is also
a blood business, which after a history of
indebtedness and regulatory troubles has come to operate like a
centralized corporation. Tensions between
the two sides are echoed in other turf battles: between the 1,034
local chapters and the national
headquarters, between veterans who believe their ''mission'' is
good deeds and newcomers who believe
theirs is good management and between the president and a
board so big that Decker said his first
impression was ''politburo.''
In a confidential memo to the board in late October, Healy
bitterly described how the organization's
internecine dynamic was summed up for her by another
executive when she arrived in September 1999:
''Red Crossers will give you the shirt off their back, but will as
easily put a knife in your back.''
All this makes the Red Cross a difficult, unwieldy institution to
head. Since 1989, there have been
three leaders and four interim leaders, counting Decker. Healy
succeeded Elizabeth Dole, the first female
president since Clara Barton. Dole spent much of the 1990's at
the helm, taking a year off when her
husband ran for president, then returning and eventually leaving
to prepare her own presidential bid. The
Red Cross board chairman, David T. McLaughlin, said that
Dole's departure was ''not terribly dissimilar''
from Healy's. Dole ''got out ahead of the game and stepped

down,'' he said, ''but she, too, left under some
pressure,'' the result of combustible internal politics. Unlike
Dole, McLaughlin said, Healy ''more than
brought on'' her own departure, but both women were ''fighting
a culture, a culture that had grown up over
a long period of time.''
In two years on the job, the biggest disasters under Healy's
watch as Red Cross president were
Hurricane Floyd and Tropical Storm Allison. On Sept. 11, she
stood outside on the headquarters' marble
steps as snipers positioned themselves on the White House roof
and, in the distance, smoke rose in
blankets from the Pentagon. She knew in her gut that the day
would have serious consequences for the
organization that she commanded and for her personally.
McLaughlin would say later that Healy, the first physician-
president of the organization, went at the
initial Sept. 11 response ''very clinically, and I have to say not
emotionally. She was totally in action, on
point.'' That intensity of focus, however, was not a quality of
Healy's that was roundly admired within the
Red Cross. Some thought her too driven and steely for an
organization that they considered an affair of
the heart. The previous Red Cross president, they say, had more
of a politician's human touch. ''Elizabeth
Dole would notice the pin you were wearing, and Dr. Healy
would notice the stain on your jacket,'' the
director of one chapter said. ''Dr. Healy was not people-
oriented, and the Red Cross is all about people.''
That day, however, the Red Cross had to be all about
performance. And Healy found what she
considered a serious wrinkle in an operation otherwise shifting
into high gear efficiently. At noon, Healy's

office received a call from the Pentagon: ''Where the hell are
you guys? Where's the Red Cross?'' The
Pentagon requested ''water, food and other things we typically
provide,'' according to an internal memo.
Charles DeVita, the organization's security chief, placed a
puzzled call of inquiry on Healy's behalf to the
Disaster Operations Center, a corporate-style bunker known as
the DOC, which is the Virginia-based
command center for all disasters. The DOC was run by two
women with 60 years of experience between
them. They resented DeVita's phone call, a colleague of theirs
told me: DeVita was a former assistant
Secret Service director whom Healy had recruited just last year.
What did the two of them know about
activating the DOC?
roy.d.middlebrook
Sticky Note
This is a good paragraph to discuss!
L201 Reading B 3
That evening, Healy, believing the problem resolved, took a
police escort to the site. She arrived at a
scene of breathtaking devastation, with an army of firefighters
''doing everything possible'' to battle the
blazing building. She saw ''the Sallies,'' as the Salvation Army
is called in charity circles, out in full force.
But, to echo the caller from the Pentagon, where the hell was
the Red Cross?
Healy expected to find the specialized teams usually dispatched
by the DOC after plane crashes.
Instead she found only four volunteers from the small, local

Arlington County chapter -- bless their
hearts'' -- earnestly trying to provide assistance to hundreds of
emergency workers. There was no E.R.V.,
or emergency response vehicle, because Arlington's was in the
shop. They didn't have any cots, so some
firefighters were stretched out on the ground. Stunned, Healy
punched out the phone number of a senior
administrator who oversaw the two women at the DOC. She
suggested the administrator report
immediately to the scene, ''get down on his knees and pray to
God for forgiveness that we're not here.''
Over the next week, Healy also stumbled on other serious
problems that originated in the DOC -- a
failure to dispatch chaplains to the Pennsylvania crash site and
a failure to realize that a confidential
database of hospitalized victims existed. And by the
professional standards of Healy and her executive
team, the problems demanded a swift, sure response: the two
women had to go. Although it was not
Healy who actually fired the women, she was held responsible
by many for what was seen as a
coldhearted, ill-timed attack on two women who meant well.
Adding a touch of melodrama, one of the
women collapsed after she was dismissed and ended up in an
intensive-care unit. All told, the incidents
served to accelerate opposition to Healy.
Some of the reaction was anxiety. ''We're all afraid for our
jobs,'' one senior official at the DOC wrote
in an e-mail message that ended up circulating widely through
the Red Cross's quite gossipy e-mail
system. Some of it was resentment. ''We have been silent up to
now, but the deeply disturbing news of Dr.
Healy firing two of our top people in Disaster Services is just
too much,'' one couple, former co-

chairpeople of the volunteer system, wrote in another e-mail
message. Referring to themselves as
previous victims of Healy's, they asked: ''Why isn't the board of
governors doing something about her?''
Well before Sept. 11, some Red Cross governors were growing
uncomfortable with what they told
Healy in her July evaluation was her hard-charging style. She
had been encountering mounting resistance
from the chapters too. The chapters had always operated pretty
autonomously. They did not like it when
Healy, who was aghast to learn how much of their financial
reporting to headquarters was voluntary,
sought to oversee them more closely. Although the Red Cross is
effectively a public trust, it has never
been a particularly transparent organization, not even internally.
Some chapter directors opposed her oversight for philosophical
reasons; they feared that it
represented the first steps toward centralization in an
organization that should belong to the grass roots.
Others didn't want Big Brother peering into their affairs. Or
streamlining the chapter system in a way that
would reduce their power or cut jobs. And then there were those
with something to hide, like the
administrator in Jersey City.
Healy thinks that her downfall probably began, improbably,
right there in Jersey City when all these
tensions exploded. An audit of the small, poor Hudson County,
N.J., chapter had uncovered irregularities,
suggesting embezzlement by the director; he was a longtime
Red Crosser who apparently had treated his
fief as a personal charity ward. Healy was horrified, suspended
the man and his bookkeeper without pay
and hired an outside firm to do a forensic audit. The auditors

found what appeared to be significant theft,
and the Red Cross turned the matter over to the local
prosecutor's office. In mid-December, a grand jury
handed up indictments of Joseph Lecowich, the director, and
Catalina Escoto, the bookkeeper, on charges
L201 Reading B 4
of stealing $1 million in Red Cross funds.
The fact that Healy's suspicions were proved right in the end
did not matter. Several board members
and veteran administrators thought that she should have
suspended the employees with pay, and they
objected to involving external auditors. During her July
evaluation, some members criticized her for being
''too fast and too tough'' in Jersey City. She asked them, ''What
should I have been, too soft and too slow?''
And they said, ''See, you're too defensive.''
When the Red Cross board hired Healy, a Harvard Medical
School graduate and mother of two
daughters, ages 15 and 22, it understood exactly whom it was
getting. From her stints as the first female
director of the National Institutes of Health and as dean of the
Ohio State University medical school, she
had an established track record. A blunt-talking New Yorker
born and bred in working-class Queens, she
was not known as a diplomat. Rather, she was known as a
driven professional who ruffled feathers but
made things happen.
Dimon R. McFerson, then the C.E.O. of Nationwide, was the
Red Cross governor who oversaw the

1999 search. He said that Healy was selected because she was
the best candidate and that he would make
the same choice again now. The board was unconcerned about
Healy's ''head-on style,'' he said, although
in retrospect it seems inevitable that the board and Healy would
end up on a collision course. ''We hired a
change agent for a culture resistant to change,'' one board
member said.
Under the Red Cross's Congressionally established charter,
seven of its 50 board members are senior
government officials, like cabinet secretaries, who almost never
participate. Another 12 are corporate,
business and academic leaders who are not Red Cross lifers.
Neither is McLaughlin; he is a former
chairman of CBS, president of Dartmouth College and president
of the Aspen Institute who, like his
predecessors, was appointed Red Cross chairman by the
president of the United States.
The remaining 30 governors, who are selected by local Red
Cross chapters through a competitive
nomination process, really control the organization. They tend
to be lifelong Red Crossers who have
worked their way up from local to national prominence within
the organization; they also tend to be
protective of traditions -- and of veteran employees with whom
they have longstanding relationships. Not
all of them, McLaughlin said, straining to be diplomatic,
''possess strong governmental or financial or
programmatic experience on top of their incredible loyalty to
the Red Cross.'' But because they are willing
to give so much of their time, many of them end up presiding
over the board's internal committees -- for
as long as six years -- and those committee chairmen dominate
the executive committee whose decisions

tend to be rubber-stamped by the full board.
During the year that Dole took a sabbatical, the executive
committee started playing a more hands-on
role, and quickly took to it. When Dole returned, according to
many Red Crossers, she did not exercise
the same strong leadership she had previously. (Dole did not
return several calls to her Washington
office.) Then, during the year between Dole and Healy, there
was another interim president. And so by
the time Healy arrived, the board was acting like a hydra-
headed C.E.O., ''overstepping its role and
authority,'' McLaughlin, who took over last May, said.
''I tried to pull them back,'' he added. ''I tried to help her.''
The board hired Healy at the hefty salary of $400,000, twice
what Dole made, because that was
Healy's value in the marketplace. According to McFerson, the
board was attracted to Healy's medical
background and the fact that she ''knew blood,'' since ''blood
was the area that needed the most attention.''
L201 Reading B 5
The board's sole concern was that Healy was coming off ''a
medical challenge,'' as McFerson put it. She
had just recovered from a brain tumor.
When the tumor was diagnosed, Healy told me, she had, in true
medical-drama style, been given three
months to live. Her unexpected recovery played a role in her
decision to take the Red Cross job. In her
grateful, post-illness state of mind, she was drawn to the chance

to ''do good.'' And in a way, some Red
Cross veterans were a bit taken aback by Healy's insta-passion
about the Red Cross itself. She was an
outsider with the zeal of an insider; she came on so strong and
fast with designs for the organization's
''greatness'' that some grew suspicious that Healy, who had
waged a failed campaign for the United States
Senate in Ohio, was motivated more by personal ambition.
It wasn't long after Healy moved to Washington from her home
in Ohio, where her husband, Dr.
Floyd Loop, runs the Cleveland Clinic Foundation, that she
realized she would be butting heads with the
board.
''She was an entrepreneur, and entrepreneurs don't like boards
or controls,'' McLaughlin said. ''She
kept getting out ahead of the board, and the board was chasing
after her. In hindsight, her decisions were
right. But her personal style was uneven.''
Healy, in turn, did not like what she found organizationally. In
a confidential memo that she sent the
board shortly before her resignation, Healy laid out a withering
analysis of the Red Cross that she had
inherited. She described ''a corporate culture steeped in silos,
turf battles, gossip and very little teamwork.
Management structure was almost militaristic . . . [but] unli ke
the military, there were few commonly
understood performance measures, and almost no system of
reward or consequences for performance.''
On the ''Blood Side'' of the Red Cross, which outsiders know so
little about, such a corporate culture
was not only costly but also potentially dangerous. The Red
Cross began ''sticking'' people on a large

scale during World War II, when it was called on to provide
blood for soldiers. Now, the Red Cross
collects blood donations at thousands of sites, tests and
processes the blood at its regional plants and then
sells the blood products -- red blood cells, platelets and plasma
-- to hospitals. It is an almost $2 billion a
year industry. But for years, Red Cross officials say, they
underpriced their blood, thinking of themselves
as a charity. With that mind-set, they went deeper and deeper
into debt, underpaying employees and
ignoring infrastructure and quality controls.
Food and Drug Administration inspectors found egregious
problems: some Red Cross blood centers
would keep testing blood until the tests delivered the desired
results; for instance, blood that tested
borderline-positive for a given virus would be retested five or
six times until the numbers came out
negative. ''That was a huge issue,'' said Dr. Jerry E. Squires, the
chief scientific officer of the Red Cross.
In 1993, after eight years of listening to the Red Cross promise
to reform, the F.D.A. obtained a court-
supervised consent decree, forcing the organization to improve
its practices to ensure the safety of the
national blood supply -- 45 percent of which is provided by the
Red Cross.
Dole oversaw an administrative and financial ''divorce'' of blood
from the chapters and centralized it
so that it would operate more like a business. It was such a
radical overhaul that the Red Cross was
''declaring victory long before we should have,'' McLaughlin
said. Even though the Atlanta blood center
had just been cited for multiple violations, the violations did
not seem to Red Cross executives as ''critical

or dangerous'' as the ones from previous years, a senior official
said. So when Healy took over, the board
told her that the organization's battle with the F.D.A. was
nearing resolution and that Atlanta was an
L201 Reading B 6
isolated case.
After Healy had been on the job five months, however, F.D.A.
inspectors paid an unexpected visit to
national headquarters. They stayed almost two months. In the
end, they delivered a 21-page notice listing
all the violations at headquarters itself. These included
inadequate ''tracking of inventory'': pints of blood
that were supposed to be quarantined because of their donors'
medical histories ended up released for
distribution. There were also labeling problems: blood testing
positive for cytomegalovirus (CMV), for
instance, was labeled negative.
Healy was ''stunned,'' she told a senior F.D.A. official.
Subsequently, in a meeting with F.D.A.
officials, Healy candidly acknowledged widespread
''infrastructure, quality and auditor problems,''
including a headquarters computer system that periodically ''lost
functionality,'' according to an affidavit
in the court file. Healy also said that some Red Cross staff
members treated the F.D.A.'s demands with a
''willful lack of urgency.''
In her meeting with the F.D.A., Healy said she found that some
Red Cross officials possessed a
startling ''lack of concern for patients.'' The F.D.A. wanted the

Red Cross to move from an ''ear stick'' to a
''finger stick'' method of drawing blood for testing, for i nstance;
the ear-stick method often overestimated
the blood count, deeming some with low blood counts eligible
for donation. ''In one instance in the past,
this caused a perfectly healthy donor to require an emergency
blood transfusion hours later,'' Healy wrote
in a memo, adding that the reason the Red Cross was resisting
the change was that it would decrease
blood collections by 5 to 6 percent.
''Although the blood supply was safe,'' Healy wrote in her
memo, ''the near misses that had occurred
presented a clear risk for the future.'' The gravity of the
findings propelled the board to set aside $100
million to upgrade the blood business. Healy hired several high-
profile executives to oversee the process.
One new executive was Decker, who had been associate general
counsel at Pharmacia. He and others
moved quickly into positions of power within the organization,
which some veteran Red Crossers found
threatening, although in fairness, Healy was promoting insiders
too. Would the Red Cross be overtaken
by bloodless professionalism?
McLaughlin said that he considered Healy's ''brilliant'' hires to
be her legacy, ensuring a solid future
for the American Red Cross -- if the individuals stay. The
F.D.A., however, is dubious about the Red
Cross's ability to follow through on its intended reforms.
Despite Healy's concern and investment of time,
money and personnel, the F.D.A. also found serious problems
under her watch, citing the troubled Salt
Lake City blood center for multiple violations last spring. In
mid-December, the F.D.A. for the first time
asked a judge to hold the Red Cross in contempt of the 1993

consent decree and to authorize serious
financial penalties -- $10,000 a day per violation, which could
amount to more than $10 million a year.
In the days after Sept. 11, Healy oversaw the transformation of
the Red Cross's austere headquarters
into what looked like the stage set for a field hospital. Medical
technicians were stationed at gurneys
beneath stained-glass windows, drawing blood in assembly-line
fashion. Outside in the garden, the Red
Cross choir performed ''God Bless America'' and received a
standing ovation from hundreds of
phlebotomists and donors. Healy found it moving. ''It was like a
temple of healing and grieving,'' she said.
At first, the Red Cross sought to impose a system on would-be
donors, urging them to make
appointments to return as needs arose. But people would not be
turned away. They wanted to wait in long
lines and give of their vital fluids. It was a spiritual thing,
Healy said, and her intuition told her to respect
those feelings, even if it wasn't the most logical way to proceed.
L201 Reading B 7
Over the following two weeks, the Red Cross's three-day
reserve of blood built to a 10-day reserve
because the demand was less than expected: there were
relatively few wounded. Nonetheless, the Red
Cross continued to collect blood, having decided it should
stockpile in anticipation of another attack or a
military deployment. Eventually, some red blood cells, which
expire after 42 days, had to be thrown
away, which engendered considerable criticism of the Red Cross

for being overzealous in its collections.
Healy shrugs this off: ''Look, the plasma was saved and frozen.
People don't realize that red blood cells
are perishable commodities. They expire. It happens. Better to
have had too much than too little.''
It is that kind of crisp logic that Healy's critics found off-
putting -- even when she was right and
especially when she displayed a certainty that she was right. It
bothered the board again and again. She
would not walk them through the paces of her decision making;
she didn't like stupid questions; she
wanted action -- yesterday. Then Healy, after taking insufficient
time to explain herself, would end up
feeling misunderstood. It happened with her subordinates too.
On Sept. 13, for instance, Healy boarded an Amtrak train for
New York. The head of Amtrak had lent
five mail cars to the Red Cross to transport supplies to the
World Trade Center relief effort. Healy pushed
her subordinates to load up the cars by 11 a.m., which required
working through the night. Some of the
workers thought her haste was excessive and that she simply
wanted the glory of personally delivering the
goods. But she was unaware. She was elated as she watched the
Red Cross executives on the train
working their cellphones, like Ramesh Thadani, her new
''C.E.O. of blood,'' who was trying to line up
freezers for plasma. ''I was thinking, 'Hey, we did it guys,''' she
told me wistfully. ''I didn't know they were
irritated.''
That same week, Healy taped a first batch of solicitations for
donations. Many Americans believed
that she was asking them to use the Red Cross as a conduit for
cash assistance to the Sept. 11 victims

themselves. But she never said any such thing. Her appeals were
vague, the essence of which was that
Americans should give of their blood and their dollars to help
the American Red Cross provide
''lifesaving assistance.'' ''Together, we can save a life,'' each
public service announcement ended.
Healy's appeals were purposely general because the American
Red Cross sees its role in a disaster as
broad. It is not a charity per se but a disaster-relief organization
that sets up mess halls and respite centers
for emergency workers while providing food, comfort,
counseling and safe haven for survivors and their
families. The Red Cross never solicits funds just for individual
victims.
In fact, until Sept. 11, it had never solicited donations for
individual disasters, either, but rather -- and
this is mandated language -- for this and other disasters.'' Since
the Red Cross can raise serious money
only in the wake of a high-profile disaster, it uses the high-
profile disasters to beef up general disaster-
relief funds. That way, there is money in the pot to assist, as
Decker puts it, ''the little old lady in
Philadelphia who loses her home to fire'' -- and to cover some
of the operating expenses of the DOC.
This practice of the Red Cross has come under fire many times -
- after the San Francisco earthquake
of 1989, the Oklahoma City bombing of 1995, the Red River
floods of 1997, the wildfires in the San
Diego area last January. Some communities just didn't like the
idea that the money being raised because
they suffered an earthquake, say, was going to be used
elsewhere or tucked into the Red Cross's coffers.
In several instances, the Red Cross ended up having to redirect

funds back to disaster-struck communities
because the pressure grew too intense.
But the Red Cross stuck by its approach until Healy …
1
CASE STUDY
Task details:
questions specified below (see page 2). These answers must be
based on corresponding theories.
Make sure you are providing sufficient and relevant arguments
sustaining your answers. In case of using real case example(s)
in support of your standpoint,
there should be a clear reference to that/those case(s).
ces should be correctly cited, and the theories
clearly identified.
conclusion parts. Questions must be answered in an essay
format, no bullet points allowed.
e format.
Formalities:
Appendix are excluded of the total wordcount.

-text References and the Bibliography must
be in Harvard’s citation style.
Weight: This task is 30% of your total grade for this subject.
It assesses the following learning outcomes:
es in a corporate
setting.
critically assess, and make decisions related to ethical issues.
2
Task:
You own a cement company, and deal with most the local
contractors for cement, sand, etc. You have a reputation of
high-quality products, and
for good customer service with your customers. Your foreman
has just run the standard quality control tests you have
performed regularly on
your products.
When the test results are ready, you discover that the new batch
of product is 10% less durable than your usual material. It is
still well above all
industry standards and meets all building codes and
requirements for the purposes for which it is intended, but it is,
nevertheless, not up to your
usual standards. Throwing it away would cost your company
many thousands of dollars.

You decide to sell the cement anyway.
Questions:
1. Should you tell your customers?
2. Should you discount the price?
3. Should you tell your employees, so they will be
knowledgeable with the customers?
4. Would you use this cement on foundations for your own
house?
IMPORTANT: Your answers should be based on a specific
ethical theory discussed in class (utilitarianism, deontology,
etc.). Choose and apply
the one you consider the best for identifying ethical issues
involved and their solution. Do not forget to cite your sources.
3
Rubrics
Identification of
main
Issues/Problems
25%
Identifies and demonstrates a
sophisticated understanding
of the main issues / problems
in the case study.

Identifies and demonstrates an
accomplished understanding of
most of the issues/problems.
Identifies and demonstrates
acceptable understanding of
some of the issues/problems in
the case study
Does not identify or
demonstrate an acceptable
understanding of the
issues/problems in the case
study
Analysis and
Evaluation of
Issues /
Problems
25%
Presents an insightful and
thorough analysis of all
identified issues/problems.
Presents a thorough analysis of
most of the issues identified.
Presents a superficial
analysis of some of the
identified issues.
Presents an incomplete analysis
of the identified issues.

Development of
Ideas
and Opinions
25%
Supports diagnosis and
opinions with strong
arguments and well-
documented evidence;
presents a balanced and
critical view;
interpretation is both
reasonable and objective.
Excellent use of Harvard
style
Supports diagnosis and opinions
with limited reasoning and
evidence; presents a somewhat
one-sided argument;
demonstrates little engagement
with ideas presented. Good use
of Harvard style
Little action suggested
and/or inappropriate
solutions proposed to the
issues in the case study.
Some use of Harvard style.
No action suggested and/or
inappropriate solutions
proposed to the issues in the

case study. Failed to use or
incorrect use of Harvard style
Link to Ethical
Theories and
Additional
Research
25%
Makes appropriate and
powerful connections
between identified
issues/problems and strategic
concepts studied in the course
readings and lectures;
supplements case study with
relevant and thoughtful
research and documents all
sources of information
Makes appropriate but
somewhat vague connections
between identified
issues/problems and concepts
studied in readings and lectures;
demonstrates limited command
of the analytical tools studied;
supplements case study with
limited research.
Makes inappropriate or little
connection between issues
identified and the concepts
studied in the readings;

supplements case study, if at all,
with incomplete research and
documentation.
Makes no connection between
issues identified and the
concepts studied in the
readings; supplements case
study, if at all, with incomplete
research and documentation.
UNIT 3
WHISTLE-BLOWING AND BUSINESS ETHICS
BUSINESS, CULTURE AND POLITICS
Whistle-Blowing
WHISTLE- BLOWING
Release of information by a member or former employee of
an organisation that is evidence of illegal and or immoral
conduct in the organisation or conduct in the organisation.
Whistle-Blowing can only be done by an member in the
organisation not a witness of a crime or a reporter.

DEFINING WHISTLE- BLOWING
1) Whistle-Blowing is something that can be done only by a
member or former member of an
organisation.
2) It must be an Information that is not available for public.
3) It should be an evidence of some significant kind of
misconduct on the part of an organisation.
4) Information must be outside normal channel of
communication.
5) Release of Information must be something that is done
voluntarily as opposed to being legally
required.
6) Whistle Blowing must be undertaken as moral protest. The
motive must be correct some wrong
not to seek vigilance or personal advancement.
TYPES OF WHISTLE-BLOWING
• Internal Whistle-
• Blowing
✓ When an individual

advocates beliefs or
revelations within
the organization.
External Whistle-
Blowing
✓ When and
individual
advocates beliefs or
revelations outside
the organization.
CO N D I T I O NS FO R J U S T I F I E D WH I S T L E -
BLOWING
Situation of sufficient moral importance:
If the situation of information is to disclosure people's live at
stake (for example, side-effects of drug
or medicine if not prescribed in the cover of medicine and
information is releaved to public by
whistle blower).
Situation when all facts of information are properly understood

with their
significance:
–A Whistle-Blower must do much documentation and other
corrections as possible because
he/she is strong obliged to people
–An Employee should not jump into conclusion without much
clarification.
–If significance of information is genuine it could be justified.
All internal channels have to be utilized without a step short of
Whistle-Blowing:
–Whistle-Blowing should be last not the first resort.
–Its justified when there in no morally preferable alternatives.
–Information should be revealed to those external subjects who
have power to change the
situation.
●Firstly,
Defence of the Law protect whistle blowers to provide
best contributions to the society.
▪Secondly,
Defence of the Law supports the right of an employee

on his freedom to speech
Arguments for Whistle-Blower Protection
●Firstly,
Law recognises whistle blowing as a right is open to abuse:
Employees might find an excuse to blow the whistle in order to
cover up
their own incompetency or inadequate performance.
▪Secondly,
Legislation to protect whistle blowers could add on rights to
employees and
make an environment difficult for managers to run company
effectively.
Arguments against Whistle-Blower Protection
1. Benefit in learning
mistakes and problems
in early stage itself.
2. Shows companies
commitment towards
good ethics and ethical
corporate climate.
1. Legitimate complaints
sends wrong signal to
other employees to
whistle blow in case of

tension or strike.
2. Employee may go
outside of normal
communication channel
which is undesirable.
BENEFITS AND DANGER OFCOMPANY WHISTLE-
BLOWING POLICY
Benefits Dangers
In 2014, World stood still with a shocking
revelation from a computer analyst Edward
Snowden.
A computer analyst whistleblower who
exposed top-secret NSA documents leading
to revelations about US surveillance on
phone and internet communications.
During the time where “free internet”, rights of a “netizen”,
“internet security” were
hot topic for debates this kind of news and revelations created
huge storm to the
Government and trust worthiness of citizens of the country.
Government and
authorities even the President himself appeared for an
explanation to this incident.
Even with much efforts government has retrieved its falling

name and trust of its
citizens. As subject of controversy Snowden is variously called
as a “traitor”,
“hero”, a whistleblower and even as “patriot”. For some he is a
traitor who worked
for Dell broke the country’s security code to retrieve classified
information. For
some he is a hero who is courage's enough to pull those ‘black
loops’ of the
government and Nations Security Intelligence.
His US passport has been cancelled and he fled to Russia for
granting asylum.
Edward Snowden: The Ethics of Whistleblowing - Who Do You
Think You Are? – YouTube
https://www.youtube.com/watch?v=mQqefZkVsm8
DILEMMA:
1.Is Edward Snowden who is an employee under Dell
Computer exposed the classified information to public
media against the government authorities and law a
“corporate traitor”?
2.Is Edward Snowden who revealed a corporate crime that
remind the public about the so called “internet security” veil
is so transparent even the authority can bypass through
security access of public. By this Act do he resembles a
“patriot” who stood for public interest?
Government and Business Policies

WHAT IS GOVERNMENT?
Government is a system of social control under which the right
to make laws,
and the right to enforce them, is given to a particular group in
society.
Governments come in different forms. Forms of government are
distinguished
on the basis of its organizational structure and the degree of
control
exercised over the society.
There are four common types/forms of government:
▪ Monarchy
▪ Dictatorship
▪ Democracy
▪ Theocracy
▪ Transitional
• In a democracy, the government is elected by the people.
Everyone who is eligible to
vote has a chance to have their say over who runs the country. It

is distinct from
governments controlled by a particular social class or group
• A democracy is determined either directly or through elected
representatives.
Direct Democracy
• People vote directly on every issue
• Only practical in a small community
Representative Democracy
• People are represented by elected officials
• Used in large countries
• Also known as a Republic government
Democracy
Fundamental Elements of Democratic Political Systems
• Power is in the hands of a king, queen, emperor or empress.
• The ruling position can be passed on to the ruler’s heirs.
• In some traditional monarchies, the monarch has absolute
power.

• But a constitutional monarchy, like the UK, also has a
democratic government that limits
the monarch's control.
• Most constitutional monarchies use a parliamentar y system in
which the king or queen
may have strictly ceremonial duties. They often have an elected
prime minister who is
the head of government.
E.g.: Qatar, UK
Monarchy
• Governmental rulers are identical with the leaders of the
dominant religion
• Governmental policies are either identical with or strongly
influenced by the principals of the
majority religion.
• Government claims to rule on behalf of God or a higher
power.
• E.g.: Iran, Vatican
Theocracy
• A country ruled by a single leader or party. The leader has not
been elected and may use force

to keep control, having an absolute control over all citizens and
every aspect of their lives.
• In a military dictatorship, the army is in control.
• Other names for a dictatorship include: Authoritarianism,
Military Junta, Right, Wing,
Totalitarianism or Fascism.
• E.g.: North Korea, Myanmar (Burma)
Dictatorship
Transitional
• A transitional government is one that is in the process of
changing from one form
to another.
• Countries with transitional governments are often unstable.
E.g.: Iraq, Afghanistan
Economic Systems
Economic systems (i.e., production, distribution and
consumption of goods and services) are closely
connected to the form of governments.

There are three main forms of economic systems:
• Capitalism
• Socialism
• Communism
Capitalism
• An economic system in which individuals and
corporations are free to invest in and own all aspect
of a business.
• In a capitalist country, people own their own
companies and can manage them to earn a profit.
• E.g.: the United States
Socialism
• Apolitical and economic system in which some businesses are
controlled by the government rather than by individuals.
• In a socialist country, people have equal rights to various
benefits
(health, education), and there is an effort to limit the
inequalities of

wealth and power.
• Taxes are often quite high to provide for these benefits.
• People do hold private property in socialist countries.
• A country can be both socialist and democratic
E.g.: Sweden
Communism
• A political and economic system in which the government
controls all business.
• Individual people cannot own property or industries and in
theory, people of all social classes are treated equally.
• Communist countries have totalitarian governments.
• All communists are socialists, but not all socialists are
communists.
• E.g.: China
Political Environment
• Political decisions affect all aspects of the business
environment
• Political decisions reflect underlying ideologies or beliefs

• Political decisions can create opportunities or threats for
organisations
• Political decisions are taken at a variety of levels:
▪ Local
▪ Regional
▪ National
▪ Global
Companies like certainty in their environment and they tend to
invest where risk is
limited.
Bureaucracy
Corruption level
Freedom of the press
Tariffs
Trade control
Education Law
Anti-trust law
Employment law

Unit 2 understanding business ethics business ethics

Unit 2 understanding business ethics business ethics

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