In recent years, Prudential Insurance Company of has been rocked by charges of unethical behavior. Soon after the company settled one class-action lawsuit over questionable sales tactics, it became embroiled in a second round of legal battles over charges related to the first lawsuit. The trouble started in the mid-1990s, when thou-sands of customers complained about the way Pruden More than six hundred thousand Prudential cus-tomers banded together in a class-action lawsuit over these sales abuses. The suit was settled in 1997 for $2.7 billion, but the terms of the settlement were controver-sial: Prudential was given the task of reviewing cus-tomers' claims to determine the level of restitution for each. Because of the pervasiveness of the sales abuses, observers believed that many customers would receive large restitution awards. After Prudential reviewed the cases, however, it awarded the top level of restitution to only one in four customers. The second round of lawsuits stemmed from the way Prudential handled its review of customer claims in the wake of the class-action suit. The company had to hire thousands of new workers to investigate these claims and recommend appropriate compensation on a case-by-case basis. Although the new employees re-ceived fast but intensive training, they had difficulty getting clear direction from their managers as they worked to unravel the complexities of individual claims. When insurance regulators who were hoping to get quicker restitution for customers protested the slow pace of the reviews, Prudential management decided to put more emphasis on productivity. The company promised employees money, gift certificates, candy, and gifts to reward speedier processing of claims reviews. As the process speeded up, reviewers began to complain that managers were ordering them to overlook docu-ments that might support the customer's side. They also said some managers balked when reviewers tried to rec-ommend the top level of restitution for some customers. Prudential admitted seeking higher productivity but said it was still keeping a close eye on quality. The com-pany also stressed that customers could appeal to inde-pendent arbitrators (at Prudential's expense) if they be-lieved they were due higher levels of restitution. Only about one in ten customers who were eligible wound up appealing, perhaps because few knew how the ap-peals process operated..........
Read the caes study and address the following:
1. Do you think the court was right to leave Prudential in charge of reviewing its customers' claims after the class-action lawsuit? Should someone outside the company have been given this responsibility in-stead? Why?
2. Within which of the three areas of concern for man-agerial ethics did Prudential appear to be experiencing problems?
3. If you headed Prudential, what standards would you include in a code of ethics to guide managers in making ethical decisions when dealing with cus-tomers and employees?