Chapter 8

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Business & Society
Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
1
Chapter 8
Personal and
Organizational
Ethics
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Learning Outcomes
1. Understand the different levels at which business ethics
2.
3.
4.
5.
may be addressed.
Differentiate between consequence-based and
duty-based principles of ethics.
Enumerate and discuss principles of personal ethical
decision making and ethical tests for screening ethical
decisions.
Identify the factors affecting an organization’s ethical
culture and provide examples.
Describe and explain actions, strategies, or “best practices”
to improve an organization’s ethical climate.
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Chapter Outline
• Ethics Issues Arise at Different Levels
• Personal and Managerial Ethics
• Managing Organizational Ethics
• From Moral Decisions to Moral Organizations
• Summary
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Organizational Ethics
• Ethical decision making occurs daily in
organizations.
• Many managers have no training in ethics
or ethical decision making.
• Ethics is vital to business success.
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Levels at Which Ethical Issues May
be Addressed
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
There are three major approaches to
ethical decision making
1. Conventional Approach
•
Discussed in chapter 7.
2. Principles Approach
•
•
Managers desire to make decisions based on more
than is provided by the conventional approach to
ethics.
A principle of business ethics is an ethical concept,
guideline, or rule that assists you in taking the
ethical course.
3. Ethical Tests Approach
•
Discussed later in this chapter.
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Types of Ethical Principles or
Theories
Teleological theories
• Focus on consequences or results.
Deontological theories
• Focus on duties.
Aretaic theories
• Focus on virtue.
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Principles Approach to Ethics
Major principles of ethics
•
•
•
•
•
•
•
•
Utilitarianism
Kant’s Categorical Imperative
Rights
Justice
Principles of care
Virtue ethics
Servant leadership
Golden Rule
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Utilitarianism
• A teleological principle that focuses on acts
that produce the greatest good for the
greatest number.
Strengths
Weaknesses
Forces thinking about the
general welfare of stakeholders
Ignores actions that may be
inherently wrong
Allows personal decisions to fit
into situational complexities
May conflict with the notion of
justice
Difficult to formulate
satisfactory rules for decision
making
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Kant’s Categorical Imperative
• A duty-based, deontological, principle.
Formulations:
1. Act only on rules that you would be
willing to see everyone follow.
2. Act to treat humanity in every case as an
end and never as a means.
3. Every rational being is able to regard
oneself as a maker of universal law. We do
not need an external authority to determine
the nature of the moral law.
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Principle of Rights
Moral rights
• Rights that we ought to have based on
moral reasoning.
Principle of rights
• Focuses on examining and possibly
protecting individual moral or legal rights.
• A negative right is the right to be left alone.
• A positive right is the right to something.
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Principle of Justice
• Involves considering what alternative
promotes fair treatment of people.
Types of justice
• Distributive
• Compensatory
• Procedural
• Rawlsian
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Ethical Due Process
Process Fairness
1. Have employees been given input into the
decision process?
2.
Do employees believe the decisions were made
and implemented in an appropriate manner?
3.
Do managers provide explanations when asked?
Do they treat others respectfully? Do they listen
to comments being made?
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Rawls’s Principles of Justice
1. Each person has an equal right to the most
basic liberties compatible with similar
liberties for others.
2. Social and economic inequalities are arranged
so that they are both:
 Reasonably expected to be to everyone’s
advantage, and
 Attached to positions and offices open to
all.
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Ethic of Care and Virtue Ethics
Ethic of care/Principle of caring
• Traditional ethics focus too much on the
individual self.
• Views the individual as relational, not
individualistic– similar to stakeholder
theory.
Virtue ethics
• Focuses on individuals becoming
imbued with virtues.
• Based on Aristotle and Plato.
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Servant Leadership
Servant leadership
• Based on the moral principle of serving
others first, such as employees, customers,
and community.
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Characteristics of Servant Leaders
•
Listening
•
Empathy
•
Healing
•
Persuasion
•
Awareness
•
Foresight
•
Conceptualization
•
Commitment to the growth of people
•
Stewardship
•
Building community
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The Golden Rule
• Do unto others as you would have them do
unto you.
The Golden Rule is:
1. Accepted by most people.
2. Easy to understand.
3. A win-win philosophy.
4. A compass when you need direction.
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A Sketch of Ethical Principles
The Categorical
Imperative
The Conventionalist
Ethic
The Disclosure Rule
The Golden Rule
The Hedonistic Ethic
The Intuition Ethic
The Market Ethic
The Utilitarian Ethic
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The Means-Ends
Ethic
The Might-EqualsRight Ethic
The Organization
Ethic
The Organization
Ethic
The Professional
Ethic
The Proportionality
Principle
The Revelation Ethic
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Ethical Tests Approach
Test of Common Sense
Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
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Factors Affecting the Morality of Managers
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Organization’s Moral Climate
Superiors
Individual
One’s Personal
Situation
Policies
Peers
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Factors Affecting the Organization’s
Moral Climate
1. Behavior of superiors
2. Ethical practices of one’s industry or
profession
3. Behavior of one’s peers in the organization
4. Formal organizational policy (or lack
thereof)
5. Personal financial need
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Improving Organizational Ethical
Culture
• Most organizations are a mix of
compliance and emphasizing values like
ethics.
Concerns about the compliance
orientation
1. Could undermine the ways of thinking or
habits of mind that are needed in ethics
thinking.
2. Can squeeze out ethics.
3. Managers many not consider tougher issues
that a more ethics-focused approach might
require.
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Improving Ethical Culture
Ethics Programs
and Officers
Realistic
Objectives
Ethical DecisionMaking Processes
Codes of
Conduct
Board of Directors’
Oversight
Top
Management
Leadership
Moral
Management
Discipline of
Violators
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Ethics Audits and
Risk Assessments
Effective
Communication
Ethics Training
Corporate
Transparency
Whistle-Blowing
Mechanisms
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Pillars of Leadership
Traits
Role
Modeling
Behaviors
Ethics
Communication
Decision
Making
Effective Rewards
and Discipline
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Moral Manager
Moral Person
Ethical Leadership
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Effective Communication of Ethics
Requires
• Written and verbal communication
• Candor
• Fidelity
• Confidentiality
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Features of Ethics Programs
• 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
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Ethics Officers
• Are in charge of implementing ethics
initiatives in the organization.
• The position may be created in response to
the Federal Sentencing Guidelines, which
reduces penalties to those companies with
ethics programs.
• Problem with diminishing organizational
status.
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Ethical Decision-Making Process
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Ethics Check
1. Is it legal?
2. Is it balanced?
3. How will it make me feel about
myself?
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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.
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Sears’ Ethics Guidelines
1. Is it legal?
2. Is it within Sears’ shared beliefs and
policies?
3. Is it right/fair/appropriate?
4. Would I want everyone to know about
this?
5. How will I feel about myself?
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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.
•
A fairly recent phenomenon.
•
Codes of conduct positively affect
corporate culture.
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Content of Codes of Conduct
•
Employment practices
•
Employee, client, and vendor information
•
Public information/communications
•
Conflicts of interest
•
Relationships with vendors
•
Environmental issues
•
Ethical management practices
•
Political involvement
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How Codes of Conduct Influence
Behavior
Codes of conduct act as a
 Rule book
 Signpost
 Mirror
 Magnifying glass
 Shield
 Smoke detector
 Fire alarm
 Club
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Violators of Ethics Standards
•
Management must forcefully discipline all
violators of ethical norms and standards.
•
Many business are unwilling to discipline
violators.
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Ethics Hotlines and Whistle
Blowing
•
Employees must have outlets to
anonymously report questionable
behaviors.
•
Hotlines are the most common way to
report corporate fraud.
•
Can be telephone, web, or email-based.
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Purposes of Ethics Training
1. Learn the fundamentals of business
ethics.
2. Learn to solve ethical dilemmas.
3. Learn to identify causes of unethical
behavior.
4. Learn about common managerial ethical
issues.
5. Learn whistle-blowing criteria and
risks.
6. Learn to develop a code of ethics and
execute an internal ethical audit.
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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.
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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 is not a given.
The Sarbanes-Oxley Act
•
Companies are required to protect whistleblowers 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.
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From Moral Decisions to Moral
Organizations
Moral Decisions
Moral Managers
Moral Organizations
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Key Terms
• Aretaic
• Moral rights
theories/principles
• Negative rights
• Categorical imperative
• Opacity
• Codes of conduct
• Positive rights
• Codes of ethics
• Principle of justice
• Compensatory justice
• Principle of rights
• Compliance orientation
• Principle of utilitarianism
• Corporate transparency
• Procedural justice
• Deontological
• Process fairness
theories/principles
• Rights
• Distributive justice
• Risk assessments
• Ethical due process
• Servant leadership
• Ethics orientation
• Sustainability audit
• Ethical tests
• Teleological
• Ethic of care
theories/principles
• Ethics audits
• Transparency
• Ethics officer
• Utilitarianism
• Ethics programs
• Virtue ethics
• Golden Rule
• Legal rights© 2012 South-Western, a part of Cengage Learning
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