Ethical Realism

May 11, 2011

Moral Issues Facing Employees

Employees have various moral decisions to make. Many of these decisions should be made on the basis of our moral obligations, but sometimes the morally preferable action could require courage and be performed beyond the call of duty. I will discuss (1) obligations employees have for the firm, (2) the illegitimate use of one’s position for private gain, (3) bribery, (4) the obligations employees have to third parties, (5) whistle blowing, and (6) self-interest. This discussion is based on chapter eight of Business Ethics (Third Edition, 1999) by William Shaw.

Obligations to the firm

Employees are hired to do something for the company (282). They obligate themselves to work for that company for financial gain. The employer often sets various conditions to employment, such as a dress code and respectful behavior.

Loyalty to the company

Most people assume that employees have a moral obligation to be loyal to the company they work for (ibid.). It is plausible that we are obligated to do our jobs in order to get our paychecks, but do we have an obligation to help the company in any way beyond strictly doing our job? Many employers seem to think so. “They may expect employees to defend the company if it is maligned, to work overtime when the company needs it, to accept a transfer if necessary for the good of the organization, or to demonstrate their loyalty in countless other ways” (283). Shaw does not tell us if we are obligated to have any loyalty to our employers, but we certainly think loyalty to the company is often a good thing and we hope that our loyalty will be rewarded through raises, promotions, good letters of recommendation, and so on.

Conflicts of interest

An employee’s interests can conflict with the company’s. Some of these conflicts of interest are minor and involve the fact that we might be doing something at work we would rather not. However, other conflicts of interest are serious and can tempt employees to behave disloyalty. “For example, Bart Williams, sales manager for Leisure Sports World, gives all his firm’s promotional work to Impact Advertising because its chief officer is Bart’s brother-in-law. As a result, Leisure Sports World pays about 15 percent more in advertising costs than it would if its work went to another agency” (ibid.). Even if Bart doesn’t act against his company’s interest, he could still be tempted to do so and the conflict of interest will still exist (283-284).

Employees should try to avoid significant conflicts of interest by staying away from situations that could tempt them from being disloyal, but it is difficult to decide when a conflict of interest is significant and it’s not always clear what employees should do when they are faced with a conflict of interest besides trying to resist the temptation to be disloyal.

Abuse of official position

The use of one’s official position for personal gain is often an abuse of power. This abuse can exist when a conflict of interest leads to disloyalty, such as Bart William’s use of his job to help his brother-in-law. Examples of abuse “range from using subordinates for non-organizational-related work to using a position of trust within an organization to enhance one’s own financial leverage and holdings” (285). Common abuses of power include insider trading and stealing proprietary data. I will discuss both in more detail.

Insider trading

Insider trading is when one person has access to information that’s unavailable to the public and will likely have an impact on stock prices (ibid.). For example, employees might know that their company is going bankrupt before the general public and sell all their stock before it becomes worthless. People who buy the stock will be deceived into thinking its worth more than it really is. In fact, it’s also insider trading for the employees to encourage family and friends to sell their stock using such “inside information.”

Insider trading involves difficult moral issues. It’s not clear exactly when employees can buy or sell stock from their own companies; it’s not entirely clear how much information a company should “disclose to stockholders about the firms plans, outlooks, and prospects;” it’s not entirely clear when such information should be disclosed; and its not entirely clear when a person is an “insider” (286).

Shaw does not tell us how we can try to resolve these issues.

Proprietary data

Companies often have secret information called “trade secrets” that they don’t want to be leaked outside the organization, and employees would be disloyal to use such information to advance the interests of competing organizations (287-288). Patents and copyrights are publicly available and protected by the law, but there’s still a chance that many people can get away with breaking copyright or patent laws. Companies have trade secrets to assure that the information isn’t used by competitors, but it is possible for others to discover the trade secret on their own and use it. For example, the formula for Coca-Cola is a trade secret, but anyone who discovers the formula can use it for their own soda company (288).

There are at least three arguments given for why some people think trade secrets should be protected by the law (ibid.):

  1. They are intellectual property.
  2. The theft of trade secrets is wrong.
  3. Employees can steal trade secrets from their companies, but that would violate the confidentiality owed to the company.

Additionally, employees often get jobs working for the competition and can be tempted to use trade secrets to benefit the competitor (288-289). This is a difficult moral issue because people have a right to seek employment and we can’t always separate proprietary information from a worker’s acquired skills and technical knowledge (289). “[T]rade secrets that companies seek to protect have often become an integral part of the departing employee’s total capabilities” (ibid.).

Bribes and kickbacks

A bribe is a payment made with the expectation that someone will act against their work duties, and bribes can be very serious when it leads to neglect or reckless behavior that can injure people (289). For example, a judge is supposed to rule impartially based on what good judgment and the law requires in order to decide what punishment to give to criminals. A judge who takes a bribe from a private prison to give people guilty of crimes long sentences and send them to that private prison have compromised their impartiality and good judgment. Moreover, the people guilty of crimes would be harmed from the bribery because their punishment would be unfairly severe as a result.

Kickbacks are a form of bribery that are attained after a person uses their work position to benefit someone (290). If the judge gets paid after sending a person to the private prison, then the bribe is a kickback.

The foreign corrupt practices act

US companies have often bribed foreign officials for favors, and such favors could harm people. For example, Lockheed Aircraft Corporation was commonly bribing foreign officials and paid $22 million to get aircraft contracts with foreign governments (ibid.). Such bribes can harm governments by getting them to pay too much for goods and services (aircrafts in this case), and the harm can then be done to citizens who have to pay the bill in taxes. In this case knowledge of the bribes caused a crisis in the Japanese government.

The FCPA forbids US companies from bribing foreign officials and the punishment for bribes includes fines and imprisonment (ibid.). It also requires that companies adhere to accounting and auditing controls to help assure that bribes aren’t being made. However, the FCPA doesn’t forbid “grease payments” that are made to assure that government officials do their jobs because companies are often benefited when government officials do their jobs properly.

Finally, the FCPA treats extortion as bribery, so companies are not allowed to pay extortion money. Extortion is when a foreign official attempts to coerce a company to pay money (290-291). For example, sometimes “the official threatens to violate the company’s rights, perhaps by closing down a plant on some legal pretext, unless the official is paid off” (291).

The case against overseas bribery

We have done very little about foreign bribery, and not everyone thinks foreign bribery should even be illegal. “[F]ew companies have recently been charged with violating the law” (ibid.). Although companies have accepted punishment for bribery in the past, executives of an American company, Lindsey Manufacturing Co., were found guilty of foreign bribery in a court of law for the first time since the FCPA was created 34 years ago (5/10/11).

Some people argue that overseas bribery should be legal because (a) forbidding it gives American companies a disadvantage to foreign competing companies that are allowed to bribe and (b) the FCPA illegitimately “imposes US standards on foreign countries and payoffs are common business practices in foreign countries” (ibid.).

Does forbidding bribery give American companies a significant disadvantage? It’s a highly contentious assertion with little evidence to back it up. First, competition is often against other American companies rather than foreign ones (ibid.). Second, studies show that the FCPA has done little to damage American export expansion. Third, there’s little evidence that the FCPA really does give US companies a disadvantage. “Even in nations where the FCPA is alleged to have hurt American business, there has been no statistically discernible effect on US market share” and “since passage of the FCPA, US trade with bribe-prone countries has outpaced its trade with other countries” (ibid.). Fourth, there’s no longer very many competitive countries that allow bribery. “In 1997, the world’s industrialized nations—the 29 members of the Organization for Economic Cooperation and Development—formally agreed for the first time to a treaty that outlaws the bribing of foreign officials” (ibid.).

Does the FCPA illegitimately impose US standards on other countries? That is an implausible assertion. First, even if bribery is common practice, that in no way proves that it’s accepted by a country (292). Shaw reminds us that illegal drug dealing is common practice in the US, but that doesn’t prove it’s socially acceptable. Second, foreign officials tend not to want their bribery to be publicized, but if it was acceptable, then we would expect that they wouldn’t mind their bribery to be publicized—but there’s pretty much no such example (ibid.). Third, although the FCPA reflects our moral standards, it’s not clear that such standards only apply here in the US. “[T]hose standards are not just a matter of taste (like clothing styles) or completely arbitrary (like our decision to drive on the right, whereas the British drive on the left). Good objective arguments can be given against bribery and related corrupt practices, whether overseas or at home” (ibid.).

What good objective arguments can be given against bribery? Bribery can harm people, and it’s not clear that there’s any good excuse available to allow companies to harm people through bribery. “For example, by encouraging on nonmarket grounds the purchase of inferior goods or the payment of an exorbitant price, bribery can clearly injure a variety of legitimate interests—from stockholders to customers, from taxpayers to other businesses” (ibid.).

Gifts and entertainment

Gifts and entertainment can be used to reward and encourage certain behavior from employees, and can cause a conflict of interest as a result. Entertainment is often provided as a gift, but entertainment isn’t as likely to be morally wrong because “it usually occurs within the context of doing business in a social situation” (294). In extreme cases gifts and entertainment can be equivalent to bribes. For example, there was a “former General Services Administration (GSA) official who pleaded guilty to a criminal charge of accepting free lunches from a subsidiary of the BellSouth Corporation, which was seeking a telephone contract with the GSA” (ibid.).

When deciding whether gifts and entertainment are appropriate, the following considerations are relevant (293-294):

  1. The value of the gift. Gifts worth thousands of dollars or more are likely to be taken as bribes. Most companies define infrequent gifts worth $25 or less to be “nominal” but anything more to cross the line.
  2. The purpose of the gift. It could be meant to be used for palm-greasing to encourage someone to do their job, used for advertising, or used as a bribe.
  3. The circumstances under which the gift was given or received. A gift given at a celebration, store opening, or during a holiday season is different than a gift not attached to a special occasion, and a gift given openly is less suspicious than a gift given in secret.
  4. The position and sensitivity to influence of the person receiving the gift. A person in a position to reciprocate the gift in the form of business decisions more likely to be taking a bribe.
  5. The accepted business practice in the industry. Gifts in the form of “tips” are part of our custom of having a waiter or waitress, but not part of being a CEO of a company. Gifts that are part of a cultural custom are much less suspicious than gifts that aren’t.
  6. The company’s policy. Some companies have stricter rules concerning gifts than others, and we have some reason to refuse gifts when our company forbids it.
  7. The law. Gifts that violate the law are almost always morally unacceptable, but the law doesn’t always forbid immoral forms of bribery or gift giving.

Obligations to third parties

Sometimes an employee has obligations to the general public that can conflict with their loyalty to the company. For example, a dishwasher can find out “that the restaurant’s chef typically reheats three- or four-day-old food and serves it as fresh” and she might have a duty to alert the public, and a consulting engineer could find “a defect in a structure that is about to be sold” and she might have a duty to tell the customer about the defect (294). In some cases an employee could find out about negligent and reckless behavior of a company that puts the public in eminent danger, such as when a company dumps toxic waste without taking proper precautions.

How should employees behave when their job duties, personal obligations, and personal interests conflicts with the interests of others? When a person is morally obligated to alert others about dangerous and deceptive business practice is not obvious, but employees should consider the importance of their job duties and personal interest compared the importance of the interests of others who are involved. Additionally, it can be morally preferable to alert the relevant third parties about immoral and illegal business practices, even if it’s not a moral obligation to do so.

The fact that business decisions can harm some people isn’t enough to prove the decision to be morally wrong. Decisions made by companies often harm the interest of competitors, and some people might argue that pollution violates our right to noninjury when it is likely to hurt people, but both of these business practices are often considered to be morally permissible. There are unfair trade practices that can illegitimately harm the competition, and there are illegal levels of pollution, but such practices aren’t always considered to be “significantly wrong.” That’s not to say that harming people is never significant. Businesses aren’t allowed to deceive their customers or do anything that would violate a person’s right to noninjury, and its often morally preferable to alert the relevant third parties about such violations.

Shaw suggests two ways to try to help us avoid rationalizations when engaging in moral reasoning to decide what to do when we face moral dilemmas:

First, we can ask ourselves whether we would be willing to read an account of our actions in the newspaper… are the contemplated actions ones that we would be willing to defend publicly? …Second, discussing a moral dilemma or ethical problem with a fiend can often help us avoid bias and get a better perspective. People by themselves, and especially when emotionally involved in a situation, sometimes focus unduly on one or two points, ignoring other relevant factors. Input from others can keep us from overlooking pertinent considerations. (296)

Whistle blowing

Whistle blowing is the act of going public with what one has reason to believe to be significantly immoral or illegal acts of an organization one is part of. Someone is not a whistle blower for telling the public about embarrassing or rude behavior (297), and being a whistle blower doesn’t involve sabotage or violence (298).

Many employees refuse to be whistle blowers because it is likely to damage their relationships at work, lead to dismissal, and even lead to being blacklisted from an industry. In fact, some whistle blowers have faced illegal forms of retaliation such as harassment, and sometimes they’ve even been murdered.

Whistle blowers must often have courage to be willing to endanger their own well being, and many of our unsung heroes are whistle blowers. However, it’s not always the right thing to do. Whistle blowing can be reckless and endanger the well being of an innocent company when its done from a “hunch” of wrongdoing rather than from a reliable method. Normal Bowie, a professor of civil disobedience, argues that whistle blowing isn’t justified unless the following criteria is met (298-299):

  1. The motive must be appropriate. The employee must want justice because the organization committed a significant immoral or illegal act. The motive must not be to get revenge or to attain fame. However, this criteria is controversial. An inappropriate motive might still help cause appropriate forms of whistle blowing. As long as the company has done something significantly wrong or illegal, it’s morally preferable for the public to find out about it one way or the other.
  2. The employee should usually seek less harmful ways to resolve the issue first. Employees should usually alert management and executives of wrongdoing before making the wrongdoing known to the public. Management or executives should usually be given a chance to rectify the situation, and alerting the public should usually be a last resort. The reason that this rule isn’t absolute is because there are situations when it’s impractical. For example, if people’s lives are in immediate danger, then there might be no better option than to go public with the information right away.
  3. The whistle blower needs compelling evidence of wrongdoing. Its reckless to accuse a company of wrongdoing when there’s a good possibility that the company is innocent. Additionally, accusations against a company are likely to harm the whistle blower rather than the company when the public doesn’t have good reason to agree that the company did something wrong. An employee could be dismissed or sued for defamation.
  4. The organization’s wrongdoing must be specific and significantly wrong. To accuse a corporation of wrongdoing involving rude behavior can be a violation of employee privacy, and the whistle blower must have specific examples of wrongdoing by the company.
  5. The whistle blowing has a chance of being successful. If whistle blowing has no chance of success, then the whistle blower is going to be likely harmed by the act without a worthwhile payoff. However, Shaw objects that whistle blowing can occasionally bring attention to a practice that will eventually lead to reforms sometime in the future even if it won’t be a solution to the specific wrongdoing done.

The question of self-interest

Whistle blowing and complaints can be dangerous for whistle blowers because they are “exposing themselves to charges of disloyalty, disciplinary action, freezes in job status, forced relocation, and even dismissal” (299). Again, whistle blowing is often also met with illegal forms of retaliation ranging from harassment to murder. It seems reasonable to ask ourselves if we should be whistle blowers or complain about business practices on the job when doing so can require us to endanger our own well being. I will discuss the relevance of self-interest to our moral decisions and obligations.

Are we obligated to protect the interests of others by reporting misconduct to management or alerting the public of significant immoral acts committed by companies we work for when doing so significantly endangers our own well being? There are two common responses to this concern. One, some people argue that “prudential reason” (rational self interest) can override our moral obligations (300). It’s possible that we are justified to neglect our moral obligations when doing so would likely harm us. Two, some people argue that prudential reasons are relevant to morality and that we are not morally obligated to help others when doing so is likely to significantly cause us harm (ibid.). In that case we wouldn’t be morally required to be whistle blowers, but it could still be morally preferable and supererogatory (above the call of duty) to be a whistle blower.

If employees have an excuse to refuse to be whistle blowers, then we have a serious problem—many people will get hurt when no one is willing to take a stand (301-302). It’s not enough just to hope that some heroic individuals will try to protect our interests. Shaw suggests that it might be a good idea to “restructure business and social institutions so such acts no longer carry such severe penalties. Just as laws currently exist to protect whistle blowers in the public sector from reprisals, so comparable legislation is needed in the private sector” (302). Although the laws protecting federal whistle blowers is actually inadequate and Obama has promised to strengthen the protection, improved legislation is a solution worth considering.

We should not use self-interest to rationalize the wrongs we or our companies do. “Each of us has a tendency to magnify potential threats to our livelihood or career. Exaggerating the costs to ourselves of acting otherwise makes it easier to rationalize away the damage we are doing to others. In the business world, for instance, people talk about the survival of the firm as if it were literally a matter of life and death” (301). Additionally, we have a tendency to over-value obedience and many people will obey leaders to the point of harming others.

We should think rationally and impartially regarding morality, but that can require changes in our personality—an attempt to be morally virtuous. One way to improve ourselves is to “perform a kind of character or personality audit” (ibid.). We can think about our life and ask ourselves questions, such as the following (ibid.):

  1. Do we follow authority blindly?
  2. Do we suffer from moral tunnel vision on the job?
  3. Do we mindlessly do what is demanded of us, oblivious to the impact of our cooperation and actions on outside parties?
  4. Have we given enough attention to our possible roles as accomplices in the immoral undoing of other individuals, businesses, and social institutions?
  5. Do we have a balanced view of our own interests versus those of others?
  6. Do we have substantial evidence for believing that our livelihoods are really threatened, or is that belief based more on an exaggeration of the facts?


Morality demands that we consider the interests of everyone who can be effected by our decisions, and that we consider the situation we are in. Our job and position in society can give us unique obligations and what we should do depends on all these factors. When considering our moral duties, the most commonly cited moral principle is the right to noninjury. No matter what moral theory we agree to, everyone seems to agree that noninjury is relevant to morality and employees have a duty not to cause significant harm to innocent people. This is why it’s often morally preferable to be a whistle blower when a company is causing significant danger or harm to the public.

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