Business and society ethics sustainability and stakeholder management 9e chapter 8

Enumerate and discuss principles of personal ethical decision making and ethical tests for screening ethical decisions.. Chapter Outline• Ethics Issues Arise at Different Levels • Perso

Chapter 8

Personal and Organizational

Ethics

Learning Outcomes

1. Understand the different levels at which business ethics may be

addressed.

2. Differentiate between consequence-based and

duty-based principles of ethics.

3. Enumerate and discuss principles of personal ethical decision

making and ethical tests for screening ethical decisions.

4. Identify the factors affecting an organization’s ethical culture and

provide examples.

5. Describe and explain actions, strategies, or “best practices” to

improve an organization’s ethical climate.

6. Identify and describe concepts from “behavior ethics” that affect

ethical decision making and behavior in organizations

Chapter Outline

• Ethics Issues Arise at Different Levels

• Personal and Managerial Ethics

• Managing Organizational Ethics

• Best Practices for Improving an Organization’s Ethical

Personal and Organizational Ethics

• Managers encounter day-to-day ethical

challenges in such areas as:

• Many managers have no training in ethics or

ethical decision making.

• Ethics is vital to business success.

Ethics Issues Arise at Different Levels

Personal level -

•Situations faced in our personal lives outside the

context of our employment

Organizational level

-•Workplace situations faced by managers and

employees

Industry or profession level

-•A manager or organization might experience business ethics issues at the industry or professional level

Societal and global levels

-•Managers acting in concert through their companies and industries can bring about constructive changes

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Personal and Managerial Ethics

Three major approaches to ethical

decision making -

1.Conventional Approach

-• Discussed in chapter 7

2.Principles Approach

-1 Managers desire to make decisions based on a

more solid foundation than is provided by the conventional approach to ethics.

2 A principle of business ethics is an ethical

concept, guideline, or rule that assists you in taking the ethical course.

•Ethical Tests Approach

-1 Discussed later in this chapter.

Types of Ethical Principles

Principles Approach to Ethics

Major principles of ethics

-•Utilitarianism

•Kant’s Categorical Imperative

•Principle of Rights

•Principle of Justice

•Ethical Due Process

•Rawl’s Principle of Justice

Ethical Tests Approach

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Managing Organizational Ethics

• Ethical decision-making is at the heart of business ethics.

• One must sharpen one’s decision-making skills to avoid amoral thinking, and achieve moral

management.

• A manager must see the organization's ethical

climate as part of its corporate culture

• An ethical climate is shaped through actions taken, policies established, and examples set

Factors Affecting the Morality of

Managers and Employees

Individual One’s Personal Situation

Factors Affecting the Organization’s Moral Climate

influence on moral climate

influence; people do pay attention to what their peers in the firm are doing

3 Industry or professional ethical practices –

ranked in the upper half; these context

factors are influential

Improving the Organization’s

Ethical Culture

• The emphasis is on creating an ethical

organizational culture or climate , one in which ethical behavior, values and policies are

displayed, promoted and rewarded

• Compliance vs Ethics Orientation-

1 Ethics thinking is principles based; compliance

thinking is rule-bound and legalistic A compliance orientation can undermine ethical thinking

2 Compliance can squeeze out ethics

3 Managers many not consider tougher issues that a

more ethics-focused approach might require

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Best Practices for Improving an

Organization’s Ethical Culture

• Three key elements that must exist if an ethical organizational culture is to be developed and

sustained:

1 The continuous presence of ethical leadership

reflected by the board of directors, senior executives and managers.

2 The existence of a set of core ethical values

infused throughout the organization by way of policies, processes and practices; and

3 A formal ethics program which includes a code of ethics, ethics training and an ethics officer.

Improving Ethical Culture

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Top Management Leadership

(Moral Management) (1 of 2)

• This premise cannot be overstated:

top management

• In a poll of communication professionals,

more than half believed that top management

is an organization’s conscience

• Managers and employees look to their bosses

at the highest levels for their cues as to what practices and policies are acceptable

Top Management Leadership

(Moral Management) (2 of 2)

• Weak Ethical Leadership – led an employee to embezzle

$20,000 over a 15 year period, explaining that she thought it was ok because her boss used firm employees for personal needs, took money from the firm’s petty cash box, raided the soft drink machine, and used company stamps Her boss said

it was all true, and that she should not be dealt with too

harshly

• Strong Ethical Leadership – When a batch of tubes in

production failed a critical safety test, leaving in question the 10,000 already manufactured, the VP, without hesitation, said

“scrap them.” That act set the tone for the corporation for

years, because everyone present knew of situations in which faulty products had been shipped under pressure of time and budget

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Two Pillars of Leadership

Decision Making

Role Modeling

Role Modeling

Ethics Communication

Ethics Communication

Effective Rewards and Discipline

Effective Rewards and Discipline

• Candor – forthright, sincere and honest

• Fidelity – be faithful to detail, accurate,

avoid deception or exaggeration

• Confidentiality – exercise care in deciding what information to disclose to others Trust can be shattered if confidences are breached

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Ethics Programs and Ethics Officers

Ethics programs typically include:

• Written standards of conduct

• Ethics training

• Mechanisms to seek ethics advice or information

• Methods for reporting misconduct anonymously

• Disciplinary measures for employees who violate ethical standards

• Inclusion of ethical conduct in the evaluation of

employee performance

Setting Realistic Objectives

-• Managers must be keenly sensitive to the possibility of

unintentionally creating situations in which others may

perceive a need or incentive to cut corners or do the wrong thing

• Unrealistic expectations are the primary driver of employees perceiving excessive pressure to achieve goals

• Example: A marketing manager set a sales goal of a 20%

increase for the next year when a 10% increase was all that could be realistically and honestly expected, even with

outstanding performance A subordinate might believe he or she should go to any lengths to achieve the 20% goal

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Ethical Decision-Making Processes

Ethics Quick Test

-1 Is the action legal?

2 Does it comply with our values?

3 If you do it, will you feel bad?

4 How will it look in the newspaper?

5 If you know it’s wrong, don’t do it.

6 If you’re not sure, ask.

7 Keep asking until you get an answer.

Codes of Conduct

-• A way of establishing standards of

behavior and communicating them to

managers and employees.

• The single most important element of an

ethics and compliance program.

• Virtually all major corporations have codes

of conduct today.

• Many have worldwide codes or standards.

• Some codes of conduct are designed

around stakeholders, others on conduct

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Content of Codes of Conduct

-• Employment practices

• Employee, client, and vendor information

• Public information and communications

Disciplining Violators of Ethics Standards -

• Management must discipline violators of

accepted ethical norms and standards.

• One reason many question the sincerity of

business with regard to codes of conduct is that many business are unwilling to

discipline violators, implicitly approving

their behavior.

• Before disciplining anyone, the firm needs

to have communicated its ethics standards clearly and convincingly

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Ethics Hotlines and Whistle Blowing -

• An effective ethical culture is contingent on

employees having (with support of top

management) a mechanism for reporting violations

• 78% of companies have anonymous

reporting systems ( Hotlines ).

• Among firms subject to Sarbanes-Oxley,

91% have such systems

• Hotlines are the most common way to

report corporate fraud.

• Can be telephone, web, or email-based.

Business Ethics Training

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Goals of Training are to learn:

1 the fundamentals of business ethics

2 to solve ethical dilemmas

3 to identify causes of unethical behavior

4 about common managerial ethical issues

5 whistle-blowing criteria and risks

6 to develop a code of ethics and execute

an internal ethical audit

Ethics Audits and Risk Assessments

Ethics Audits

-•Intended to carefully review such ethics initiatives

as ethics programs, codes of conduct, hotlines,

and ethics training programs

Sustainability Audit -

•Helps to identify sustainability issues within an

organization.

Fraud Risk Assessment

-•Review processes that identify and monitor

conditions that may pertain to the company’s

exposure to compliance/misconduct risk and to

review methods for dealing with concerns.

Corporate Transparency

Corporate Transparency

-•A quality, characteristic, or state in which

activities, processes, practices, and decisions that take place in companies become open or visible to the outside world.

•The degree to which an organization:

• Provides public access to information.

• Accepts responsibility for its actions.

• Makes decisions more openly.

• Establishes incentives for leaders to uphold

standards

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Board of Director Leadership

and Oversight -

• Leadership and oversight of ethical

initiatives by boards has not been a given.

The Sarbanes-Oxley Act

• Companies are required to protect

whistle-blowers without fear of retaliation.

• It is a crime to alter, destroy, conceal, cover

up, or falsify documents to prevent their use

in a federal government lawsuit.

Behavioral Ethics – Striving Towards

a Deeper Understanding (1 of 3)

of the behavioral processes that are taking

place:

• Bounded ethicality – occurs when managers and employees find that behaving ethically is difficult because of various organizational pressures

• Conformity bias – the tendency people have to take their cues for ethical behavior from their

peers, rather than exercising their own,

independent judgment

• Overconfidence bias –people may be more

confident of their moral character than they have reason to be

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Behavioral Ethics – Striving Towards

a Deeper Understanding (2 of 3)

a way that supports their preexisting beliefs &

self-interest.

issue is posed; if posed as an “ethical” issue, they

make more ethical decisions

“slippery slope.”

standards for different roles in life

ethical scoreboard in their heads, and use this

information when making future decisions, balancing decisions, and avoiding a moral “surplus”.

Behavioral Ethics – Striving Towards

a Deeper Understanding (3 of 3)

• Ill-conceived goals – poorly set goals that

encourage negative behaviors

• Motivated blindness – overlooking the

questionable actions of others when it is in one’s own best interest

• The slippery slope – causes people not to notice others’ unethical behavior when it gradually

occurs in small increments

• Overcoming values – the act of letting

questionable behaviors pass if the outcome is

good This can occur when managers put more emphasis on results rather than on HOW the

results are achieved

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Moral Decisions, Moral Managers,

and Moral Organizations

• The goal of managers should be to create

moral decisions , moral managers , and

recognizing that what we frequently

observe in business is the achievement of moral standing at only one of these levels

that is fully populated by moral managers, making moral decisions (and practices,

policies, and behaviors), but this is seldom achieved

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