Management Ch- 4
Ethics- is a set of moral principles or values that defines right and wrong for a person or group.
U.S. Sentencing Commission Guidelines: Companies can be prosecuted and punished
even if management didn’t know about the unethical behavior. Up to $300 million in fines
Nearly all businesses are covered, punishes a number of offenses, and encourages businesses to be
proactive.
Offenses: invasion of privacy, fraud, customs violations, antitrust violations (price fixing, bid riggingmake a deal so one person gets a bid over another) civil rights violations, theft, embezzlement, copyright
infringement, extortion, etc.
Steps in determining fine size: (Proactive companies get smaller fines)
1. Determine the base fine
2. Compute a culpability score.
3. Mult the base fine by the score
Compliance Program Steps:
1. Establish Standards and procedures
2. Assign upper level managers to be in charge
3. Delegate division making authority only to ethical employees
4. Encourage employees to report violations
5. Train employees on standards and procedures
6. Enforce standards consistently and fairly
7. Improve program after voliations
Ethical Behavior- conforms to a society’s accepted principles of right or wrong.
Workplace Deviance- is unethical behavior that violates organizational norms about right and wrong.
1. Production Deviance- hurts the quality and quantity of work produced (includes leaving work
early, taking long breaks etc)
2. Property Deviance- is unethical behavior aimed at company property or products (include
sabotaging, stealing, or damaging equipment etc)
3. Employee Shrinkage- theft of company merchandise by employees.
4. Political deviance- is using one’s influence to harm others in the company.
5. Personal Aggression- hostile or aggressive behavior toward others. (include sexual harassment,
verbal abuse, stealing from coworkers etc)
Ethical Answers Depend on:
1)Ethical Intensity- the degree of concern people have about an ethical issue. High ethical intensitymanagers are more aware of the impact their decision will have on others. 6 factors determine ethical
intensity:
1.
2.
3.
4.
Magnitude of Consequences- is the total harm or benefit derived from an ethical decision
Social Consensus- is agreement on whether behavior is bad or good.
Probability of Effect- is the chance that something will happen and then result in harm to others
Temporal Immediacy- is the time between an act and then consequences the act produces. Is
stronger if a manager has to lay off workers next week as opposed to 3 months from now
5. Proximity of Effect- is the social, psychological, cultural, or physical distance of decision maker
from those affected by his or her decisions. Is greater for a manager who works with employees
who have to be laid off than it is for the higher ups who ordered the layoffs.
6. Concentration of Effect- is how much an act affects the average person.
2)Moral Development: (Kohlberg)
1. Preconventional level- people decide based on selfish reasons (Punishment and obedience, and
instrumental exchange)
2. Conventional level-make decisions that conform to societal expectations. They look for others
for guidance on ethical issues. (Good Boy, Nice Girl, Law and Order)
3. Postconventional- use internalized eithical principles to solve eithical dilemmas. (Social Contract
and Universal Principle)
3)Principles of Ethical Decision Making:
1. Principle of Long-term Self-interest- you should never take any action that is not in your or your
organizations long term self interest.
2. Principle of Personal Virtue- holds that you should never do anything that is not honest, open,
and truthful and that you would not be glad to see reported in the newspaper or on TV.
3. Principle of Religious Injunctions- holds that you should never take an action that is unkind or
that harms a sense of community, such as the positive feelings that come from working together
to accomplish a commonly accepted goal.
4. Principle of Government Requirements- the law represents the minimal moral standards of
society and so you should never take any action that violates the law.
5. Principle of Utilitarian Benefits- states that you should never takes an action that does not result
in greater good for society.
6. Principle of individual rights- holds that you should never take action that infringes on others
agreed- upon rights
7. Principle of Distributive Justice- you should never take any action that harms the least fortunate
among us in some way
Practical Steps to Ethical Decision Making
1.
2.
3.
4.
Select and hire ethical employees
Establish a Code of Ethics
Train employees to make ethical decisions
Create an ethical climate
1)Selecting and Hiring Ethical Employees:
Overt Integrity Tests- estimate job applicants honesty by directly asking them what they think or feel
about theft or about punishment of unethical behaviors.
Personality based integrity tests- indirectly estimate job applicants honesty by measuring psychological
traits such as dependability and conscientiousness.
2)Establish a Code of Ethics
Communicate code of ethics both inside and outside the company
Develop ethical standards and procedures specific to business
3)Ethics Training
Develops employee awareness of ethics
Achieves credibility with employees
Teaches a practical model of ethical decision making
4)Establish an Ethical Climate- managers do this by:
1. Acting ethically
2. Are active in company ethic programs
3. Report potential ethics volitions
4. Punish those who violate the code of ethics
Ethical Decision Making
1.
2.
3.
4.
5.
6.
Identify the problem
Indentify the Constituents
Diagnose the Situation
Analyze your Options
Make your Choice
Act
Whistleblowing- reporting others ethics violations
Social Responsibility- is a business’ obligation to pursue policies, make decisions, and take actions that
benefit society.
Who are Organizations Socially Responsible For?
1. Shareholder Model- holds that the only social responsibility that businesses have is to maximize
profits. Pros- firm maximizes shareholder wealth and satisfaction and increases stock value.
a. First problem is that organizations cannot act effectely as moral agents for all company
shareholders.
b. 2nd problem is that the time, money, and attention diverted to social causes undermine
market efficiency.
2. Stakeholder Model- management’s most important responsibility is not just maximizing profits,
but the firms long term survival, which is achieved by satisfying not just shareholders, but the
interests of multiple corporate stakeholder.
a. Stakeholder- are persons or groups who are interested in and affected by the
organizations actions.
i. Primary stakeholder- are groups on which the organization depends for its long
term survival (shareholders, employees, customers, suppliers, govt, local
communities)
ii. Secondary stakeholder- such as the media and special interest groups, can
influence or be influenced by a company. They do not engage in regular
transactions with the company and are not critical to its long term survival.
(media, special interest groups, trade associations)
Responsibilities:
1. Economic Responsibility- or the expectation that a company will make a profit by producing a
product or service valued by society, has been a business’ most basic social responsibility.
2. Legal Responsibility- is a company’s social responsibility to obey society’s laws and regulations
as it tries to meet its economic responsibilities.
3. Ethical Responsibility- is a company’s social responsibility not to violate accepted principles of
right and wrong when conducting business.
4. Discretionary Responsibilities- pertain to the social roles that business play in society beyond
their economic, legal, and ethical responsibilities.
Social Responsiveness- refers to a company’s strategy for responding to stakeholders’ expectations
concerning economic, legal, ethical, or discretionary responsibility.
1. Reactive Strategy- will do less than stakeholders expect. It may deny resp for a problem or fight
any suggestions that it should solve a problem
2. Defensive Strategy- will admit resp for a problem but would do the least required to meet
stakeholders’ expectations.
3. Accommodative Strategy- will accept responsibility for a problem and take a progressive
approach by doing all that could be expected to solve the problem.
4. Proactive Strategy- will anticipate responsibility for a problem before it occur, do more than
expected to address the problem, and lead its industry in its approach.
Realities of social responsibility: no tradeoff between social responsibility and profit. Usually it does
pay. Does not guarantee profitability.