UNETHICAL BEHAVIORS
IN ORGANIZATIONS AND
HUMAN NATURE
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Copyright © 2012 John Wiley & Sons

Chapter 1
Learning Objectives
 Explain the competitive advantages of creating and maintaining an ethical organization
 Appreciate that unethical behaviors occur in all organizational operations
 Identify common types of unethical behaviors
 Understand that unethical behaviors can be very costly to organizations
 Describe different theories of human nature and the stages of moral development
 Discuss why good people occasionally behave unethically
Chapter 1: Collins, Business Ethics

Daily Occurrence of Ethical Dilemmas
Ethics is the set of principles a person uses to determine whether an action is good or bad.
People experience a multitude of ethical dilemmas on a daily basis. Almost every decision and action a person makes impacts other people.
Chapter 1: Collins, Business Ethics

Daily Occurrence of Ethical Dilemmas
Examples of Ethical Dilemmas:
 Should you arrive at work early, on time, or late?
 Should you submit adequate work that meets a deadline or submit the highest quality work possible and miss the deadline?
 Should you inform your boss about your colleague's questionable work habits?
 Should the organization incur additional costs for environmental protection technologies not required by law?
 Should you leave work at the designated time or cancel after work plans and stay late to finish a project?
Chapter 1: Collins, Business Ethics

Ethics Resource Center 2009 Survey on types of ethical misconduct respondents observed most within the previous 12 months (top 5):
 Company resource abuse
 Abusive or intimidating behavior toward employees
 Lying to employees
 Email or internet abuse
 Conflicts of interest
Chapter 1: Collins, Business Ethics

These ethical misconducts were observed in both large firms and small firms, and in all sectors examined, including:
 Government agencies (29% reported ethical misconducts)
 Nonprofit organizations (26%)
 Publicly traded for-profit firms (25%)
 Privately held for-profit firms (25%)
Chapter 1: Collins, Business Ethics

E V E R Y P R O F E S S I O N A N D I N D U S T R Y
E X P E R I E N C E S E T H I C A L P R O B L E M S
Government Agencies
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors
 Managers often underestimate the costs associated with unethical behaviors
 The most direct cost is lost business
Other costs associated with unethical behavior:
 Legal costs
 Theft
 Recruitment and turnover
 Monitoring
 Reputation
 Abusive treatment
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors
 Lawsuits are one of the most easily quantifiable costs associated with unethical behaviors
 The Equal Employment Opportunity Commission maintains an annual database of charges filed and resolved under various antidiscrimination laws
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors
 Employees can steal money, products, or time
 The biggest source of retail theft is employees, not customers
 Theft can occur at all levels of an organization
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors
 Organizations incur monitoring costs when they employ unethical individuals
 Once an employee has lied, he or she needs to be more closely monitored
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors

An organization’s reputation is one of its most important assets
 Reputation management accounts for 63% of an organization’s market value
 Continuous negative publicity creates substantial barriers
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors
 Abusive supervision affects approximately 13% of U.S. workers
 Costs in terms of absenteeism, health care, and lost productivity have been estimated to be $23.8 billion annually
Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors
 Unethical organizations cannot be trusted
 Unethical organizations incur greater costs recruiting employees, customers, suppliers, and investors
Chapter 1: Collins, Business Ethics

Competitive
Advantages of
Ethical
Organizations
Ethical organizations, compared to unethical organizations, are more likely to:
1.
Attract and retain high-quality employees
2.
Attract and retain high-quality customers
3.
Attract and retain high-quality suppliers
4.
Attract and retain high-quality investors
5.
Earn good will with community members
Chapter 1: Collins, Business Ethics

Competitive Advantages of Ethical Organizations
 If you were a job applicant, would you rather work for an ethical or an unethical organization?
 If you were a customer, would you rather purchase products or services from an ethical or unethical organization?
Chapter 1: Collins, Business Ethics

 Are employees, customers, and suppliers inherently selfish or altruistic?
 Can they be trusted or do they have to be carefully monitored?
 From a managerial perspective, what are the most important features of our moral imperfection?
Chapter 1: Collins, Business Ethics

Are we:
 Born Good?
 Born with Inherited Sin?
 Born Morally Neutral?
Chapter 1: Collins, Business Ethics

 Children are born into a particular family, neighborhood, and culture that influence their moral judgment
 Parents are a child’s most direct role model and shape the child’s environmental experiences
Chapter 1: Collins, Business Ethics

Kohlberg’s Stages of Moral Development
Level 1 - Pre-conventional
 Obedience & punishment orientation
 Instrumental Orientation
Level 2 - Conventional

‘Good Boy’-’Nice Girl’ Orientation

‘Law-and-Order’ Orientation
Level 3 - Post-Conventional
 Social contract Orientation
 Universal Ethical Principles
Chapter 1: Collins, Business Ethics

Kohlberg’s Stages of Moral Development
 Preconventional Level
 individual is not perceived as being part of a broad community with rules and regulations
 Conventional Level
 societal roles and agreements matter a great deal to the individual
 Postconventional Level
 individual delves into the principles that govern societal roles and order
Chapter 1: Collins, Business Ethics

 Managers need honest information from other employees and stakeholders to achieve optimal organizational performance
 Children lie and deceive others as soon as they can formulate alternative strategies
 Lying and cheating continue through high school
 Cheating patterns continue in college
Chapter 1: Collins, Business Ethics

Exhibit 1.3: The Day Americans Told the Truth
Chapter 1: Collins, Business Ethics

Why Do Good People Behave Unethically?
 Unintended Unethical Behaviors
 Choosing Between Competing Values
 Intentional Unethical Behaviors
 Failure to Report Unethical Behaviors
Chapter 1: Collins, Business Ethics