BE--Sample Case Analysis--F2023
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BUSINESS ETHICS—WAYNE EASTMAN
SAMPLE MANGERIAL ETHICS ANALYSIS
Part I. Prescriptive Analysis [required section]
You are: Tom Monaghan, CEO, Domino’s Pizza
We are: RBS Ethics Consultants, Inc.
Background: In this first portion of our report, you have asked us to give you the best arguments for either retaining Domino’s “
we’ll deliver in 30 minutes or your money back” guarantee or ending it, and then to give you our recommendation on which course of action to take. Alternative strategies: 1) Change the Game: Get rid of the guarantee; establish other bases on which to differentiate the company’s product; 2) Stay the Course: Keep the guarantee, possibly with modifications, such as establishing delivery time targets based on distance, with customers to be informed by cell phone of delays, and a new ad campaign emphasizing how commitment to
safety overrides speedy delivery as a company value.
“Change the Game” “Stay the Course”--
Arguments for ending the guarantee
Arguments for guarantee 1. The rush to deliver is immoral—to gain some extra profit, D is predictably killing people because of employees’ incentive to speed. 1. The proposed principle against D’s policy is unacceptably broad—speed is a reasonable goal that consumers understandably value.
2. D is a pizza company whose basic job or
mission does not involve speed. A rush to deliver by D is morally troubling in a way a
FedEx rush is not.
2. D’s business model is based on speedy delivery. There is no fundamental moral difference between D and companies like FedEx.
3. Any social value of getting pizzas to people faster is simply not worth the hazards of the policy. D cannot defend killing as many as 20 people per year in order to deliver pizzas a few minutes faster.
Any reasonable cost-benefit analysis would
show that D’s policy--or a revised one with
the Internet and cell phones--is inefficient.
3. The cost-benefit calculus may well favor D’s policy—for one thing, the critics have no evidence that D’s accident rates are
worse than for other companies. 20 deaths (which may be overstated) from 80,000 Domino’s drivers is about the same as the overall U.S. rate of 40,000 deaths from around 200,000,000 drivers.(1, 2) 1
4. Apart from the other concerns with D’s policy, there is an overwhelming practical case for jettisoning it. D needs to take quick action to avoid getting stigmatized as
a corporate bad actor, having juries award huge punitive damages, and possibly having the whole company destroyed.
4. The legal risks are overrated, and in any case it would be wrong for D to allow itself
to be stampeded by a media rush to judgment fueled by plaintiff’s lawyers. If D doesn’t hold the line, it will only lead to worse media frenzies against D and other companies.
5. Clear rules have value: A clear “no guarantee” position is a much more understandable fix for Domino’s problems than an effort to fix the flawed guarantee program with cell phones or a new advertising campaign. 5. Open-ended standards have value: Though there are problems with the way the guarantee has worked, a revised, more nuanced guarantee with advanced technology and a commitment to safety is better than just abandoning the guarantee.
6. D should be very worried about the negative externalities of its guarantee to people hurt by the company: It’s D’s business to do something, not to wait for outside regulators.
6. D should not be too worried about possible negative externalities, except as they become costs to the company. Let the legal system decide what the costs are.
7. It’s moral for the law to impose huge liabilities on D because D’s policy encourages speeding and deaths.
7. It’s immoral for the law to impose huge liabilities on D because D has tried hard to avoid speeding by its drivers.
8. Intelligent flexibility is a moral virtue: D is not the little company it was; it should reinvent itself by differentiating its product in new ways. Through coming up with new approaches to differentiate the product, D is likely to become a better company.
8. Steadfast dedication is a moral virtue: Though D can be flexible in modifying and
updating its guarantee, it should stay dedicated to the policy, partly because people work better when a company is consistent in its values and its long-term strategy.
9. Respect for the basic moral rule that companies like everyone else should respect the law calls for abandoning the guarantee. The point isn’t whether the costs of paying out verdicts are small or large; the point is that you have a fundamental moral duty to follow the basic 9. D’s policy does not violate the law. Negligence law is anything but clear; bad lawyering has lost some cases for D, but good lawyering in others has won. More fundamentally, the right approach is to consider the overall costs and benefits of D’s policy given the legal system and all 2
rules laid down in law. Morality cannot be
a matter of costs and benefits.
other factors, not to pretend there is a moral
rule that solves the issue.
10. Moral Foundations (Haidt): Withdrawing the guarantee is called for under the harm/care foundation—don’t hurt
innocent people!—and the justice foundation—do the right thing even if it costs you. It makes sense as well under the
purity/sacredness foundation, since many people are offended by edgy business conduct like D's. The human gut hates the idea of businesses making money at the expense of human life.
11. Moral Foundations (Haidt): Adhering to the guarantee appeals to people's feelings
under the justice foundation—keep your promises and have integrity! It makes sense as well under the loyalty foundation
—stick to your group!—and the authority foundation—act like a leader! Also, because the accidents don’t involve people in D’s care, it does not offend most people’s intuition under the harm/ care foundation.
11. UMG (Mikhail): The guarantee is condemned by popular opinion for the same reason pushing the fat man to save five people is condemned: D is planning a course of action that sacrifices some people
to create benefits for itself and its customers. It’s actually worse because D is profiting itself, unlike in the trolley case where the pusher is saving other people’s lives.
11. UMG (Mikhail): The guarantee is accepted by popular opinion for the same reason that pulling the switch that kills one person after saving five is acceptable: D is doing its best to serve the public by providing a product speedily, and the harm to a few people is an unwanted side effect of its justified course of action, not the cause of the benefits received by D and its customers.
12. Obedience (Milgram): The basic chilling fact about human nature revealed by Milgram also applies in the D case. People in a corporate structure like D’s will
do what they believe the situation demands
of them. Drivers operating under a 30-
minute guarantee are like Milgram’s experimental subjects who pulled the switch. You know that speeding or running
a red light is wrong. But faced with a corporate policy and practice that demands delivery by a certain time and with the reality that you can always be let go as a driver if you cost the company money, you 12. Obedience (Milgram): The Milgram scenario is radically different from the real-
world situation in the D’s case. Instead of an authoritative researcher telling the subjects to pull the switch, in D’s we have independent franchises and drivers making their own choices. The view of drivers as robots speeding to make the 30-minute target is foolish. D’s policy is about building corporate good will—“have a pizza on us!”—not about coercing employees. Drivers are likely to get tipped better when they give customers a free or cheap pizza for a slow delivery—given 3
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will be willing to hurt people as a D’s driver.
that, the bigger incentive for them is very likely to be safe rather than to speed.
Our Recommendation: Domino’s Should Get Rid of the Guarantee
Domino’s should make a clean break with the past by abandoning a time guarantee for delivering its pizzas. Once the guarantee policy was a helpful ingredient in Domino’s rise from a small outfit to a huge chain. Now, though, the guarantee is about as helpful to Domino’s as offering its customers rotten anchovies as a topping. As a national company with deep pockets that is directly in the sights of aggressive trial lawyers, Domino’s is in a different situation from when it was a start-up venture. For a fringe, start-up company, an edgy, ethically tricky approach may be the best one to adopt. But with size
comes respectability and responsibility. In terms of the way it should make its corporate decisions, Domino’s is now more like Time-Warner than Death Row Records.
As an established pizza chain, Domino’s does not want to risk being seen as an aggressive profiteer that encourages its drivers to speed. Domino’s is not Ford, FedEx, or UPS, for whom the risks of autos and trucks are understood as inherent in their businesses. When a pizza company like Domino’s imposes extra risks of dying on third parties, it creates understandable moral anger. That anger has been turned into jury awards, including one for $78 million in punitive damages (3), and presents a serious risk to the future of the company. Jurors’ moral intuitions that lawyers rely on to win verdicts may be unfairly tilted against business, and the trial lawyers themselves are anything but saints. But Domino’s is a for-profit business. It needs to take the legal system and the moral judgments that it relies on, including anti-business judgments, as they are rather than to crusade against them. Even if it is true, as it may well be, that Domino’s drivers cause fewer accidents per pizza
delivered than patrons of sit-down pizza parlors cause by their driving, human moral intuition sees the situations as very different. Joshua Greene’s and John Mikhail’s different approaches to trolley problems converge in helping to explain why Domino’s policy, as opposed to an alternative business model that might be associated with more deaths, is likely to disturb people. Per Greene, the “personal/moral” nature of a driver hitting a pedestrian or another car overrides cost-benefit analysis. Per Mikhail, the strategic, profitable nature of the risk created by Domino’s speedy delivery policy means that the company will be seen as the cause of harm. At this point, modifying the guarantee policy by softening it or by instituting an ad campaign stressing the company’s commitment to safety isn’t the way for Domino’s to go. Such
a middle-way approach might make sense if Domino’s were writing on a blank slate. But it’s not. Domino’s needs a clear, decisive response to the risk that the guarantee presents. 4
After ending its guarantee—which should be done simply by stopping the marketing campaign, without any mea culpas that will be used against the company in court--what if Domino’s wants at some point in the future to market to nostalgic old customers who remember the old slogan and to prospective customers who value speed? (4) That’s fine—but for ethical as
well as legal reasons, the company should avoid a 30-minute time guarantee. Notes keyed to analysis--
1.
http://findarticles.com/p/articles/mi_m3190/is_n33_v23/ai_7865517/
(1989; contains 20 Domino’s accident
deaths and 80,000 drivers figures); http://www.infoplease.com/ipa/A0908129.html
(U.S. driving deaths)
2.
http://www.statemaster.com/graph/trn_lic_dri_tot_num-transportation-licensed-drivers-total-number
(number of US drivers)
3.
http://www.snopes.com/business/consumer/dominos.asp
(lawsuits that motivated Domino’s to drop its guarantee)
4.
http://blogs.wsj.com/law/2007/12/17/dominos-pizza-amp-the-law/
(Domino’s new 30 minute “non-
guarantee”
General information--
Domino’s--
http://www.fundinguniverse.com/company-histories/domino-s-inc-history/
(corporate history) Tom Monaghan—
http://www.epluribusmedia.org/features/2006/0311tom_monaghan.html
(activism; sale to Bain)
Part II. Ethical Relations Analysis [required section]
You are: Tom Monaghan, CEO, Domino’s Pizza
We are: RBS Ethics Consultants, Inc.
Background: You have asked us to analyze how you can as the founder and CEO of Domino’s best can best act as a person of character and vision in your interactions with major relevant stakeholders in the wake of a decision either to: a) scrap the old guarantee and institute a new “You’re happy or your money back” guarantee, or b) to retain the old “We deliver in 30 minutes or your money back” guarantee. [Note: It is optional not required to introduce a third choice as I do here—it’s fine to make the choices in the Ethical Relations section the same as those in the Prescriptive section.]
What follows are the gist of remarks you could be making to members of four different key groups in the event of either decision. After that are brief thoughts on how the Option A and Option B remarks are likely to play out with the different stakeholders, and on how they relate to
the kind of ethical character you have and that you aspire to. Option A—Create a New Guarantee Option B--Keep the Old Guarantee
5
Drivers
(Phlegmatic) “We get that the 30-
minute guarantee put pressure on you guys. With the new guarantee, there’s none—the receipt explains how they get in touch with us to get their money back if they’re not satisfied. You can concentrate on doing your jobs and earning your tips.
(Sanguine) “We’re going to be rolling
out a new ad campaign with a driver in Ohio who stopped to help an old woman having trouble with her car late at night. The pizza was late, but the customer understood and gave the
driver a big tip. At the end of the ad you see the driver and the customer and the old woman all smiling. You guys are our stars!”
Franchisees
(Melancholic/Sanguine) “The decision we’ve just made to empower
our customers was one we thought was important for all of you as well as for the company. For our customers to trust us, we have to trust
them—that’s why we’re holding ourselves accountable and putting our
customers in the driver’s seat. We’re highly optimistic that our new “Bring Back the Noid” campaign is going to be our best ever, and we see all of you as vital parts of our success going
forward. Here’s some more on that…”
(Choleric/Sanguine) “As you know, our contracts with you make it clear that the liability for accidents rests with the franchise, not with Domino’s. At the same time, we want you to understand that we stand behind you and we’re committed to doing the right thing by you. There’s
lots of legal stuff involved that’s not my department, but I want you know that you have my promise as we roll out our new promotion that you will be at the heart of our success going forward.” D’s HQ managers
(Melancholic) “This company has been a great love of my life. And as I
talk to you now I love it as much as I ever have. It’s not my only love—
there’s Marjorie, there’s my daughters, there’s my faith. But it’s a
huge part of me. And you all are, too.
You’ve made Domino’s what it is, and I owe you more than I can ever say. I’m committed to Domino’s being a great company, with or without me. Someday—not now, not
soon, but the day will come—I will be moving on and other people will (Choleric) “We’re a different kind of company. Most companies would have caved under the pressure, but we’re not going to do it. That has something to do with me. I believe in
a higher power beyond all the powers of this earth. That’s my business, and
I don’t impose it on the company or on any of you. But it does have something to do with my absolute commitment that this company will be guided by the highest principles. We will not blow every which way based on fashion or lawsuits. I’ve 6
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own the company. That’s tough for me to deal with, and it may be for you, too. But it’s also healthy. Business and life are change. We all gotta change, we all gotta grow.”
hired all of you based on my faith in you as people who are absolutely committed to doing the right thing, and I look forward to moving forward
with all of you.”
Potential Outside Investors
(Choleric) “You Bain guys are the “unlock the value” people. And you think that if you buy out Domino’s from old Tom you can unlock value. That investors will like Domino’s better if there isn’t a boss that supports right to life and Ave Maria. And maybe you’re right. But I can tell you that nobody watches the money more closely than I have and no one is less sentimental. Look at what I did in cutting out our speedy delivery guarantee. This company has been run right. Let me tell you more about that…”
(Choleric) “Look, I don’t have to sell.
I’m not a guy who gets scared or caves. Look at the way I handled the lawsuit stuff—I hung tough. Not the way a scared corporate suit would do it. Yes, I’m open to doing a deal with
you. But I’m also very good with keeping 100% of Domino’s. The number you offer me has to be the right number for me to have any interest.”
First, on how your remarks are likely to be received by different stakeholders: You are likely to get a better response from the drivers, franchisees, and potential investors with Option A. On the
other hand, for the company’s current group of Michigan managers, Option B with its emphasis on consistency and loyalty offers a stronger appeal. For such managers, Option A with its suggestion that you may be moving on is likely to be unsettling. For prospective investors, we believe Option A is a signal of investor-oriented management that is more likely to go along with
a high sale price to a private equity firm than Option B is. Second, on how your remarks relate to your character: Here, as in many situations, you face a choice between a more assertive, choleric approach—in this case, resisting the pressure to scrap your guarantee policy—and a more harmonizing, flexible approach—in this case, responding to the lawsuits and negative press with a different guarantee or no guarantee at all. Here also, as is frequently the case, an approach that is harmonizing with respect to one group is assertive with respect to another. Your team of top managers, as previously discussed, are likely to share not only loyalty to you, but also loyalty to established corporate policy. For them, your changing direction involves an act of assertive leadership. Since effective ethical leadership in our judgment involves a strong blend of temperamental elements—choleric assertiveness as well as 7
melancholic compliance, happy sociability along with calm detachment—we are not telling you whether you should tilt in this case toward the assertive, adamant side or the flexible, harmonizing side of the ethical spectrum. Both sides, depending on the facts of the situation and the specifics of the people you are dealing with and your own character, have great value. Our analysis here, unlike our analysis in the earlier, prescriptive part of our report, is not aimed at directing you toward which option to take—rather, it is aimed at helping you as an ethical leader to be all you can be, whether you decide to scrap the guarantee or not.
A Sanguine-Choleric Conclusion: Stay the Course! [optional section]
Thanks much, RBS. You brought out some aspects of the situation that I know are there in the background—for example, whether I should consider selling the company—but that I wouldn’t necessarily have thought about except for what you wrote. I like your suggestion for an ad campaign featuring a driver who stopped to help an old lady—do you guys need a percentage if we use your idea? :)
I appreciate your point about the decision relating to my personality. To build a company like Domino’s, it helps to have a pretty strong-minded, bull-headed side, and I’ve got that side of me in spades, hearts, diamonds, and clubs, as my wife and everyone who’s ever worked with me can tell you. You can go wrong by fighting, sure. The fighting side of me has gotten me in trouble in the past. I’m sure it’ll do the same in the future. But when it comes down do it, I’ve got to do what feels right and what makes me feel happy. And what feels right to me is not caving to the pressure. Lawsuits come and lawsuits go. The real leaders don’t just do what the suits tell them to do. They stick with the vision that made their company great. I’ve got that vision. I’m going to stick with it. A Phlegmatic-Melancholic Conclusion: Change the Game [optional section]
In the end, do I go with my gut and stick with the guarantee? Or with the well-argued case you guys make for ending it? Or with a new trust-based guarantee? Where I come out is with a position that’s different from any of those three ways to go. Your argument against the guarantee is fine, but as the guy who built the business I don’t find it speaking to me. But in the end, I also don’t believe my own gut when it tells me to keep the guarantee. In the end, I think I can do more for the company if I get how we need to change at Domino’s when I’m not around anymore to run the show. I thank you all again for helping me to focus on that part of the story. This particular decision could go either way, and it’s not mission critical for the company, much as it’s pretty important. But the question of how my company becomes someone else’s company as
I move from the scene—that is mission critical. So what do I do? A trust-based guarantee has appeal, but it seems to me too much like a defensive response to the suits. So we end the old guarantee. And I start the conversations with my family, my team, and the suits—including the private equity people—about the next stage in my life, and about the company’s future. It’s time. 8
9
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