Professional and Business Ethics
Prof. Peter Hadreas
Spring, 2014
Course Website:
http://www.sjsu.edu/people/peter.hadreas/co
urses/ProfandBusEthics/
1
Ethics
as
Organizational Culture
Corresponds to chapter five
of Nelson and Treviño textbook.
2
ANSWER KEY FOR SECOND MIDTERM
Question
Numbers
1. C
2. A
3. C
4. D
5. A
6. C
7. A
8. D
9. E
10. A
11. C
12. E
13. A
14. B
15. E
16. E
17. D
18. E
19. E
3
LETTER GRADE EQUIVALENCE FOR SECOND
MIDTERM SCORES
19 – 18
17
16
15
14
13
12
A
B+
B
BC+
C
D+
4
Big Box Retailers, Walmart, Target and Costco have
very different cultures.
anti-union stance, foreign product sourcing, full-time WalMart employees earn average of $10.78 per hour, but starting pay can be
lower. Wal-Mart's high annual turnover-rate of ~70%, arguably shows
that workers are dissatisfied.
differentiates itself from Wal-Mart by offering more upscale,
trend-forward merchandise; different customer base from Wal-Mart:
about 80% have attended college and 48% have completed college;
supports many philanthropic and environmental causes.
warehouse club, focuses on selling products low cost in large
volume. Costco Employee Agreement sets forth benefits,
compensations, wages, disciplinary procedures, paid holidays, bonuses,
and seniority. As of March 2011, non-supervisory hourly wages ranged
from $11.00 to $21.00 in the U.S. 85% of Costco's workers have health
insurance as compared with less than 50% at Wal-Mart and Target.
5
How Desirable Are Ethical Cultures to
Employees?
“A 2006 study found that 82 percent of
Americans would actually prefer to be paid
less but work for an ethical company than
be paid more but work for an unethical
company. Importantly, more than a third of
people say that they’ve left a job because
they disagreed with the company’s ethical
standards. So having an strong ethical
culture is an important way to retain the best
employees.”
“The Business Effect of Ethics on Employee Engagement,” LRN Ethics Study, 2006,
www.lrn.com; cited in textbook, p. 155.
6
Ethical Culture: Multisystem Framework
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, p. 153.
7
Misalignment of formal and informal culture
systems.
“. . . if the same organization touts its honesty
in its values statement but regularly
deceives customers in order to land a sale,
and the organization gives a highly
‘successful’ but highly deceptive sales
representative the firm’s sales award, the
organization’s formal and informal systems
are out of alignment. . . . Employees
perceive that deceit is what the organization
is really about, despite what the ethics code
says.”
textbook, p. 154.
8
9
Executive Ethical Leadership
Is about Reputation, Which Rests
On These Two Pillars
Moral Person
Moral Manager
Tells followers
Tells followers
how they should
how good leader
behave and holds
behaves
them accountable
Traits
Role Modeling
• Honesty
Takes visible ethical
• Integrity
action
• Trust
Behaviors
Rewards/Discipline
• Openness
Holds people
• Concern for people
accountable for
• Personal morality
ethical conduct
Decision-making
Communicating
• Values-based
An: “ethics and values”
• Fair
message
Treviño and Nelson textbook, p. 159.
10
Strong
Weak
Moral Manager
Executive Ethical Leadership Reputation Matrix
_____________________________________
Moral Person
_______________________
Weak
Strong
Hypocritical
Ethical
leader
leader
Unethical
leader
?
Ethically neutral leader
Treviño and Nelson textbook, p. 159.
11
Legendary example of an Ethical Leader
“James Burke, former CEO of Johnson and Johnson, is
probably the best known example of a highly visible
ethical leader. Soon after being appointed CEO in the
late 1970s, he challenged his senior managers to revisit
and update the company’s age-old credo [the customer
is its primary stakeholder]. Less than three years later,
the Tylenol poisoning occurred.” . . . “Seven people in
the Chicago area were killed when they ingested Tylenol.
(Tylenol tablets were laced with cyanide, but it was
exterior sabotage – no fault of J&J itself.) J&J pulled 31
million bottles off the shelf with a retail value of $100
million, sent messages explaining the situation to over
500,000 doctors, hospitals and distributors of Tylenol.
James Burke and other executives were accessible to
the press and interviewed by the media.” textbook, pp. 160 and
365.
12
James Burke
Fortune magazine named him as one of the ten greatest CEOs of
all time and he has a membership in the National Business Hall of
Fame.
13
Example of an Unethical Business Leader
“In interviews, senior executives cited Al Dunlap as a
senior executive with a reputation for unethical
leadership . . . . When hired at Sunbeam he was
considered such a celebrity CEO that the stock price
spiked 49 percent in one day. But while at Sunbeam,
he was also known for ‘emotional abuse’ of
employees – being ‘condescending, belligerent and
disrespectful’ . . . Dunlap also demanded that
employees make numbers at all costs, and he
rewarded them handsomely for doing so. . . . Dunlap
also lied to Wall Street . . . In 2002 Dunlap . . . paid a
$500,000 fine and agreed that never again would he
be an officer or director of a public company.”
textbook, p. 161-2.
14
Al Dunlap
15
Example of an Hypocritical Business Leader
“Jim Bakker remains the best public example of hypocritical
leadership. In the late 1970s and early 1980s, Bakker
built Praise the Lord (PTL) ministry into one of the
world’s biggest religious broadcasting empires. At its
peak, Bakker’s television ministry reached more than 10
million homes and had 2,000 employees. Bakker, along
with his wife, Tammy Faye, claimed to be doing ‘the
Lord’s work’ . . . he raked in millions of dollars,
convincing the faithful to purchase a limited number of
lifetime memberships in two hotels . . . The hotels were
never completed. The funds donated for these projects
were being tapped to support operating expenses,
including huge salaries and bonuses for the Bakkers . . .
. in 1989 Bakker was convicted on fraud and conspiracy
charges. He spent eight years in prison.” textbook, pp. 162.
16
Jim Bakker
17
Example of an Ethically Neutral or ‘Silent’
Business Leader
“ . . . [Sandy] Weill [former CEO of Citigroup] exemplified
‘ethically neutral’ leadership. . . . ‘Citi helped Enron
hide debt; Salomon [a Citigroup unit] peddled worthless
WorldCom debt . . .” “Being tone deaf on ethics issues
is exactly what ethically neutral leadership is about. . . .”
“He [Weill] said a CEO relies on ‘very competent
people’ and trusts them to do a good job. In the case of
ethics management, that meant leaving it to the
executives running Citi’s various businesses. If the head
of a division thought ethics was important, ethics got
resources and attention. If the head didn’t promote
ethics, attention turned elsewhere, and most likely to
financial performance goals. So, with a kind of benign
neglect, Weill sat on the sidelines and provided little
ethical leadership.” textbook, p. 163-4.
18
Sandy Weill
19
Ethical Culture: Multisystem Framework
(Again)
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, p. 165-6.
20
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Executive Leadership: Ethical, Unethical, Hypocritical,
Neutral?
Selection Systems: “ . . . formal systems in place for
recruiting and hiring new employees.” May shape a
culture by preferring character types: Southwest
Airlines employees, including pilots, for example, are
selected on the basis of their cheerfulness, optimism
and team spirit among other credentials.
Treviño and Nelson textbook, p. 166
21
Ethical Culture: Multisystem Framework
(Again)
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, p. 167-8.
22
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Executive Leadership: Ethical, Unethical, Hypocritical,
Neutral?
Policies/Codes: Ethics codes usually address basic
prloblems such as respectful treatment of others,
conflicts of interest, expense reporting, and giving and
receiving gifts.
Policy manuals are lengthier than codes and cover a
multitude of job situations that are specific to the
industry.
QUESTION
Consider SJSU codes about cheating and plagiarism.
When are SJSU ‘academic integrity’ codes effective,
when not.?
Treviño and Nelson textbook, p. 169
23
Ethical Culture: Multisystem Framework
(Again)
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, p. 170-1.
24
Ethical Culture: Multisystem
Orientation/Training; Again Alignment with Informal
System is Key.
“ . . . a young man who worked in mortgage lending
in 2006 said that his company had provided a high
quality week-long training program to prepare him
for the job. . . . he was told to advise clients to be
sure they could afford their payments and to avoid
incurring additional credit card debt. But when he
returned to the office, his ‘mentor’ (who had been in
the job only six month longer than he had) told him
that all that mattered was closing the deal . . . and
that ‘advising’ clients was a waste of time.”
Treviño and Nelson textbook, p. 171
.
25
Ethical Culture: Multisystem Framework
(Again)
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, pp. 171-4.
26
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Performance Management: ways that individual and
group rewards and discipline are connected with
employee behavior.
Treviño and Nelson textbook, p. 171
.
27
Ethical Culture: Multisystem Framework
Explained
Performance management: Again it’s key that it’s in
alignment with informal systems.
“ . . . imagine a corporation where everyone knows that
the top sales representative’s sales depend upon lying
to customers about delivery dates despite ethics codes
talk about customer satisfaction as a key value . . .
Members of the sales force recognize that information
about what is rewarded carries the ‘real’ cultural
message, and so the code becomes meaningless.”
QUESTION
What are the performance manage systems in place in
most classrooms as SJSU?
Treviño and Nelson textbook, p. 173
28
Ethical Culture: Multisystem Framework
(Again)
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, p. 153.
29
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority Structure: How is power and
responsibility distributed in the organization? Formal
assignment of power and responsibility is described by
the organization chart.
Most companies are
•‘bureaucratic,’ that is, a hierarchy of authority. There
are many varieties of hierarchical organizations. Basic
differences concern the division into main company
functions and the amount of people who doing similar
tasks.
Organization of companies may also be
• horizontal or ‘flat’
• matrix
30
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Hierarchical
Hierarchical organizations may be helpfully
conceived (roughly) pyramidal. They are made of up
several levels of power with the greatest amount of
power at the top that involves fewer executives and
at the base involving, generally, a greater amount of
employees.
31
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Hierarchical
32
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Hierarchical
“Staff and Line”
33
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Hierarchical
“Staff and Line”
34
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Hierarchical
Agency Department System
35
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Flat or Horizontal: few or
no levels of middle management between staff and
executives
36
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority: Matrix: individuals are
managed through more than one reporting line.
37
How Desirable Are Ethical Cultures to
Employees?
“A 2006 study found that 82 percent of
Americans would actually prefer to be paid
less but work for an ethical company than
be paid more but work for an unethical
company. Importantly, more than a third of
people say that they’ve left a job because
they disagreed with the company’s ethical
standards. So having an strong ethical
culture is an important way to retain the best
employees.”
“The Business Effect of Ethics on Employee Engagement,” LRN Ethics Study, 2006,
www.lrn.com; cited in textbook, p. 155.
38
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Organizational Authority:
“Research has found that the more a firm demands a
unquestioning obedience to authority, the higher the
unethical conduct among employees, the lower the
tendency to seek ethical advice about ethical issues,
and the lower the likelihood that employees would
report violations or deliver ‘bad news’ to
management.”
textbook, p. 176
39
Ethical Culture: Multisystem Framework
(Again)
FORMAL SYSTEMS
INFORMAL SYSTEMS
Executive Leadership
Selection Systems
Policies/Codes
Orientation/Training
Performance Mgmt.
Authority Structure
Decision Processes
Role Models/Heroes
Ethical and
Unethical
Behavior
Norms
Rituals
Myths/Stories
Language
Alignment?
Treviño and Nelson textbook, p. 153.
40
Ethical Culture: Multisystem Framework
Explained
FORMAL SYSTEMS
Decision-making Processes:
I. Overreliance on quantitative analysis.
A company can arrive at the judgment that it’s cheaper to
pay compensation claims than to develop safer
conditions. McWane Co., as we shall see, is an
extreme example of this line of thinking.
II. Burden of Proof.
Does company try as a rule to show a product is safe, or
not unsafe. Engineers of the space shuttle Challenger
were forced to go along with the launch because they
couldn’t supply hard evidence that the launch was
unsafe; although they had strong doubts that it was
safe. textbook. pp. 177-8.
41
Ethical Culture: Multisystem Framework
Explained
INFORMAL SYSTEMS
Role Models and Heroes:
Heroes are symbolic figures who set
standards of performance by modeling
certain behaviors, and they can be the
organization’s formal leaders. Heroes
can also be founders who are not longer
even present in the organization.”
textbook, p. 179.
42
Ethical Culture: Multisystem Framework
Explained
INFORMAL SYSTEMS
Role Models and Heroes:
Steve Jobs (1955 –2011)
Given up for adoption as a baby, Jobs was raised in California. Jobs owned
millions of shares in Apple and Disney, and while he was known as a
demanding boss, he dresses simply, speaks with an even, humble tone, and
has won many awards, including the National Medial of Technology, CEO of
the Decade, and others.
43
Ethical Culture: Multisystem Framework
Explained
INFORMAL SYSTEMS
Norms: “The Way We Do Things Around
Here” Norms are standards of behavior
that are accepted as appropriate by
member of a group. Can apply to clothes.
IBM for many years had a formal dress
code. Men wore dark suits, white shirts,
and polished shoes. At Apple computer Tshirts, jeans and tennis shoes are the
norm.
textbook, p. 181.
44
Ethical Culture: Multisystem Framework
Explained
INFORMAL SYSTEMS
Rituals:
They are ways of affirming and communicating a
culture in a tangible way. For example, “[s]ome
companies have annual ‘bring your child to
work days’ that encourage employees to value
time with their families. Some have on-site child
care so that having lunch with your preschool
child in the company cafeteria becomes a valued
daily ritual and symbol of the extent to which the
organization values family.
textbook, p. 181.
45
Ethical Culture: Multisystem Framework
Explained
INFORMAL SYSTEMS
Myths/Stories:
At IBM, a story that has been told and retold
describes how a low-level employee denied Tom
Watson, then IBM president, entry into a
restricted area of the company because Watson
was not wearing his IBM identification badge.
Watson praised the employee, suggesting the
importance of upholding company rules and
applying them to everyone.”
textbook, pp. 181-2.
46
Ethical Culture: Multisystem Framework
Explained
INFORMAL SYSTEMS
language:
Typical way of avoiding what may be an ethical
decision is to use euphemisms such as
‘downsizing,’ ‘rightsizing,’ restructuring,’
and ‘targeted outplacement.’
QUESTION
When the DOW Jones averages drops 1500 points
in a quarter and that’s referred to as a
‘correction’ would you say that’s a
euphemism.
textbook. pp. 182-3
47
Slide# 30: simple Hierarchical Organijzational Chart:
http://www.google.com/search?q=corporate+organizational+charts+staff+anh+line&tbm%252Fwww.wisegeek.or
g%252Fwhat-is-an-organizational-chart.htm%3B800%3B800
Slide # 31: Agency Department Chart,
http://upload.wikimedia.org/wikipedia/commons/5/56/Deprtments_in_advertising_agencies.jpg
Slide 32: staff and line organization chart:
http://www.google.com/search?q=corporate+organizational+charts+staff+and+line&tbm=isch&tbo=u&source=un
iv&sa=X&ei=
Slide 33: staff and line organizartional chart: http://www.referenceforbusiness.com/management/ObOr/Organizational-Chart.html#b
Slide #34: flat or horizontal organizational chart:
http://www.google.com/search?q=Flat+or+Horizont+Organizational+Chart&tbm=isch&tbo=u&source=univ&sa=X
&ei
slide #35: chart of matrix organization: http://en.wikipedia.org/wiki/Matrix_management