© 2015 Cengage Learning
1
Chapter 8
Personal and
Organizational
Ethics
© 2015 Cengage Learning
2
Learning Outcomes
1. Understand the different levels at which business ethics may be
2.
3.
4.
5.
6.
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.
Identify and describe concepts from “behavior ethics” that affect
ethical decision making and behavior in organizations.
© 2015 Cengage Learning
3
Chapter Outline
• Ethics Issues Arise at Different Levels
• Personal and Managerial Ethics
• Managing Organizational Ethics
• Best Practices for Improving an Organization’s Ethical
Culture
• Behavior Ethics – Striving Towards a Deeper
Understanding
• Moral Decisions, Moral Managers, and Moral
Organizations
• Summary
© 2015 Cengage Learning
4
Personal and Organizational Ethics
• Managers encounter day-to-day ethical
challenges in such areas as:
•
conflicts of interest
•
sexual harassment
•
customer dealings
•
pressure to compromise on personal standards,
and more
• Many managers have no training in ethics or
ethical decision making.
• Ethics is vital to business success.
© 2015 Cengage Learning
5
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.
© 2015 Cengage Learning
6
Personal and Managerial Ethics
Three major approaches to ethical
decision making 1. Conventional Approach •
Discussed in chapter 7
2. Principles Approach •
•
Managers desire to make decisions based on a
more solid foundation 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.
© 2015 Cengage Learning
7
Types of Ethical Principles
Teleological theories • Focuses on consequences or results of an
action.
Deontological theories • Focuses on duties, without regard to
consequences.
Aretaic theories • Focuses on the virtue of an action.
© 2015 Cengage Learning
8
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
Ethics of care
Virtue ethics
Servant leadership
The Golden Rule
© 2015 Cengage Learning
9
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
Test of The Big Four (greed, speed, laziness or haziness)
Gag Test
© 2015 Cengage Learning
10
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.
© 2015 Cengage Learning
11
Factors Affecting the Morality of
Managers and Employees
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Organization’s Moral Climate
Superiors
Individual
One’s Personal
Situation
Policies
Peers
© 2015 Cengage Learning
12
Factors Affecting the
Organization’s Moral Climate
1. Behavior of superiors – the number one
influence on moral climate
2. Behavior of one’s peers – the second
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
4. Personal financial need – ranked last
© 2015 Cengage Learning
13
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 Orientation1. 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.
© 2015 Cengage Learning
14
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.
© 2015 Cengage Learning
15
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
© 2015 Cengage Learning
Ethics Audits and
Risk Assessments
Effective
Communication
Ethics Training
Corporate
Transparency
Whistle-Blowing
Mechanisms
16
Top Management Leadership
(Moral Management)
(1 of 2)
• This premise cannot be overstated:
• The moral tone of an organization is set by
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.
© 2015 Cengage Learning
17
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.
© 2015 Cengage Learning
18
Two Pillars of Leadership
Traits
Role
Modeling
Behaviors
Ethics
Communication
Decision
Making
Effective Rewards
and Discipline
© 2015 Cengage Learning
Moral Manager
Moral Person
Ethical Leadership
19
Effective Communication
of Ethical Messages
Requires • Written and verbal communication
• Non-verbal communication
• 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.
© 2015 Cengage Learning
20
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
© 2015 Cengage Learning
21
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.
© 2015 Cengage Learning
22
Ethical Decision-Making Processes
© 2015 Cengage Learning
23
Ethics Check Ethics Check 1. Is it legal?
2. Is it balanced?
3. How will it make me feel about myself?
© 2015 Cengage Learning
24
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.
© 2015 Cengage Learning
25
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.
© 2015 Cengage Learning
26
Content of Codes of Conduct •
Employment practices
•
Employee, client, and vendor information
•
Public information and communications
•
Conflicts of interest
•
Relationships with vendors
•
Environmental issues
•
Ethical management practices
•
Political involvement
© 2015 Cengage Learning
27
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.
© 2015 Cengage Learning
28
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.
© 2015 Cengage Learning
29
Business Ethics Training Goals of Training are to learn:
1.
2.
3.
4.
5.
6.
the fundamentals of business ethics
to solve ethical dilemmas
to identify causes of unethical behavior
about common managerial ethical issues
whistle-blowing criteria and risks
to develop a code of ethics and execute
an internal ethical audit
© 2015 Cengage Learning
30
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.
© 2015 Cengage Learning
31
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.
© 2015 Cengage Learning
32
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 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.
© 2015 Cengage Learning
33
Behavioral Ethics – Striving Towards
a Deeper Understanding (1 of 3)
Behavioral Ethics helps us to understand many
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.
© 2015 Cengage Learning
34
Behavioral Ethics – Striving Towards
a Deeper Understanding (2 of 3)
• Self-serving bias – people may process information in
a way that supports their preexisting beliefs & selfinterest.
• Framing – ethical judgments are affected by how an
issue is posed; if posed as an “ethical” issue, they
make more ethical decisions.
• Incrementalism –a predisposition toward the
“slippery slope.”
• Role morality – a tendency to use different ethical
standards for different roles in life.
• Moral equilibrium – a tendency for people to keep an
ethical scoreboard in their heads, and use this
information when making future decisions, balancing
decisions, and avoiding a moral “surplus”.
© 2015 Cengage Learning
35
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.
© 2015 Cengage Learning
36
Moral Decisions, Moral Managers,
and Moral Organizations
• The goal of managers should be to create
moral decisions, moral managers, and
ultimately, moral organizations, while
recognizing that what we frequently
observe in business is the achievement of
moral standing at only one of these levels.
• The ideal is to create a moral organization
that is fully populated by moral managers,
making moral decisions (and practices,
policies, and behaviors), but this is seldom
achieved.
© 2015 Cengage Learning
37
© 2015 Cengage Learning
38
Key Terms (1 of 2)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Aretaic theories
Behavioral ethics
Bounded ethicality
Categorical imperative
Codes of conduct
Codes of ethics
Compensatory justice
Compliance orientation
Conformity bias
Core ethical values
Corporate
transparency
Deontological theories
Distributive justice
Ethical due process
Ethical leadership
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Ethical tests
Ethic of reciprocity
Ethics audits
Ethics of care
Ethics officer
Ethics orientation
Ethics programs
Ethics screen
Formal ethics program
Framing
Fraud risk assessments
Golden Rule
Ill-conceived goals
Incrementalism
Indirect blindness
Legal rights
© 2015 Cengage Learning
39
Key Terms (2 of 2)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Legal rights
Moral equilibrium
Moral rights
Motivated blindness
Negative rights
Opacity
Organizational
Sentencing Guidelines
Overcoming values
Overconfidence bias
Positive rights
Principle of justice
Principle of rights
Principle of
utilitarianism
Procedural justice
Process fairness
Rights
•
•
•
•
•
•
•
•
•
•
Role morality
Self-serving bias
Servant leadership
Slippery slope
“smell” test
Sustainability audit
Teleological theories
Transparency
Utilitarianism
Virtue ethics
© 2015 Cengage Learning
40