Chapter 8
Personal and Organizational Ethics
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1.
2.
3.
4.
5.
Understand the different levels at which business ethics 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 of
these factors at work.
Describe and explain actions, strategies, or “best practices” that management may take to
improve an organization’s ethical climate.
TEACHING SUGGESTIONS
INTRODUCTION – Chapter 8 has two primary purposes, the first of which is to explore some
of the various ways to make judgments about ethical dilemmas. The authors present two
approaches to making moral judgments, the principles approach and the ethical tests approach.
The second purpose is to discuss ways in which managers can improve the moral culture and
behavior of their organizations.
KEY TALKING POINTS – This chapter gets into what many philosophers consider the heart of
ethics—how to make judgments about ethical dilemmas and come to justifiable decisions about
them. As students will quickly note, there is a bewildering collection of ways to make moral
judgments. The authors introduce and discuss eight different principles and seven different
ethical tests that a manager might use to think about moral dilemmas in the business context. In
addition to these fifteen concepts, the authors also provide a table with fourteen additional
principles (although to be fair, there is some overlap between the table and text) and methods to
reconcile conflicts among the various approaches.
Most people rely on their instincts to make moral judgments, as pointed out in the text. The
students in your class will be no different, and so they will likely become somewhat frustrated
trying to learn all of these different approaches. One way to help overcome this frustration and
simultaneously help cement the concepts in their minds is to provide a number of ethical
dilemmas for them to debate in class discussions (moral philosophy textbooks typically have a
plethora of such cases and a hypothetical ethical dilemma is available in the group project for
this chapter). The students will be tempted to come to an immediate decision about the “right
thing to do” (relying on their instincts), but the instructor will need to hold them back and guide
the discussion toward the different principles and ethical tests that can be used to deliberate the
cases. It often helps for students to analyze the dilemmas using an ethical principles and/or
ethical tests matrix as this device enables students to visualize the differences in the various
principles and tests. A sample matrix is included at the end of this chapter. Instructors also may
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Chapter Notes
want to assign students to read “Sorrow and Guilt: An Ethical Analysis of Layoffs” from SAM
Advanced Management Journal, Spring 2000, pp. 4-13. This article reviews the different ethical
principles utilized by managers when making decisions regarding job layoffs and shows students
that the ethical principles and tests are relevant. The article also illustrates that the principles
actually serve as the basis for many decisions made by management.
A particular strength of this chapter is the authors’ emphasis on the ethical climates within
organizations, and the profound influence they have on individuals’ moral judgments. Although
the textbook cannot do full justice to this idea (due to space limitations), there is strong evidence
of the overwhelming power of organizational climates on individual ways of thinking, feeling,
and acting. As the chapter indicates, surveys of thousands of Harvard Business Review readers
found that the behavior of superiors is the number one factor that influences unethical decisions
and behaviors.
Even Lawrence Kohlberg, the pioneer of the cognitive moral development field, recognized the
influence of group forces over the individual’s ethical decision making, stating, “Individual
moral action usually takes place in a social or group context and that . . . context usually has a
profound influence on the moral decision making of individuals.” If we recognize the strong
influence of organizational climate in conjunction with Kohlberg’s observation that most adults
make moral judgments at his level 2, we can see why organizational members are so compliant
with their bosses’ demands or even mere suggestions. Instructors will do well to emphasize the
influence of organizational climate, because the prevailing assumption among Americans is that
individuals make individual choices, largely unaffected by “outside” influences.
Using the Ethical Decision-Making Process illustrated in Figure 8-8, instructors can demonstrate
how the ethical principles and tests introduced in this chapter are utilized by organizations
through the conduct of top management and corporate codes of conduct. Students should revisit
the ethical dilemmas that they explored when they first began discussing ethical principles and
tests; however, when students use the ethics screen in the Ethical Decision-Making Process to
determine the ethical course of action to take in a given quandary, instructors should direct
students to consider the principles / tests employed by top management and the corporate code of
conduct. This also emphasizes the difference between addressing ethical issues at the personal
level versus the organizational level.
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
The Waiter Rule: What Makes for a Good CEO?
Using Ex-Cons to Teach Business Ethics
To Hire or Not to Hire
The Travel Billing Expense Controversy and the False Claims Act
Phantom Expenses
Family Business
Should Business Hire Undocumented Workers?
The High Cost of High Tech Foods
The Betaseron Decision (A)
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Chapter Notes
Felony Franks: Home of the Misdemeanor Weiner
A Moral Dilemma: Head Versus Heart
The Case of the Fired Waitress
After-Effects of After-Hours Activities: The Case of Peter Oiler
Is Hiring on the Basis of “Looks” Discriminatory?
Ethics in Practice Cases:
Promise Versus Lie
Higher Goals, More Pressure, Lower Ethics?
The Anonymous CEO: Strong or Weak Ethical Leader?
Can You Learn Business Ethics from a Convicted Crook?
Spotlight on Sustainability:
Sustainability Audits Becoming Popular
Power Point slides:
Visit http://academic.cengage.com/management/carroll for slides related to this and other
chapters.
LECTURE OUTLINE
I.
ETHICS ISSUES ARISE AT DIFFERENT LEVELS
A. Personal Level
B. Organizational Level
C. Industry or Profession Level
D. Societal and Global Levels
II.
PERSONAL AND MANAGERIAL ETHICS
A. Principles Approach to Ethics
1. What is an Ethics Principle?
2. Types of Ethical Principles or Theories
3. Principle of Utilitarianism
4. Kant’s Categorical Imperative
5. Principle of Rights
6. Principle of Justice
7. Ethics of Care
8. Virtue Ethics
9. Servant Leadership
10. The Golden Rule
B. Ethical Tests Approach
1. Test of Common Sense
2. Test of One’s Best Self
3. Test of Making Something Public (Disclosure Rule)
4. Test of Ventilation
5. Test of Purified Idea
6. Test of the Big Four
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Chapter Notes
7. Gag Test
8. Use Several Tests Together
III.
MANAGING ORGANIZATIONAL ETHICS
A. Factors Affecting the Organization’s Moral Climate
1. Pressures Exerted on Employees by Superiors
B. Improving the Organization’s Ethical Culture
1. Compliance versus Ethics Orientation
2. Top Management Leadership (Moral Management)
a. Weak Ethical Leadership
b. Strong Ethical Leadership
c. Two Pillars of Leadership
d. Ethical Leadership Characteristics
3. Effective Communication
4. Ethics Programs and Ethics Officers
a. Ethics Officers
b. Raising the Status of Ethics Officers
5. Setting Realistic Objectives
6. Ethical Decision-Making Processes
a. Ethics Screen
b. Ethics Check
c. Ethics Quick Test
d. Sears’ Guidelines
7. Codes of Conduct
a. Ways of Perceiving Codes
8. Disciplining Violators of Ethics Standards
9. Ethics “Hotlines” and Whistle-Blowing Mechanisms
10. Business Ethics Training
a. Business Roundtable Institute for Corporate Ethics
11. Ethics Audits and Risk Assessments
12. Corporate Transparency
13. Board of Director Leadership and Oversight
IV.
FROM MORAL DECISIONS TO MORAL ORGANIZATIONS
V.
SUMMARY
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.
1.
Students will have many different answers to this question. They may range from
decisions whether or not to cheat on a test, to situations in their love lives, to illegal
downloading of copyrighted material. Answers to the second part of the question, ethical
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Chapter Notes
dilemmas they have faced as part of an organization, are likely to be similarly diverse.
They may range from decisions related to underreporting time spent at work, to taking
company property (pens, damaged goods, petty cash), to reporting the unethical / illegal
conduct of others. One that I faced in an organization was whether to tell the managing
partner at a law firm where I did not work that associates were padding their hours on their
time sheets. The law firm made more money from the additional hours, and I was friends
with some of the attorneys who were padding their time. However, the clients were paying
for the additional time. Further, since I wasn’t employed with the firm where the practice
was occurring, I wasn’t certain how management would respond to the news. Finally,
reporting the incident could have had a negative impact on my reputation in the legal
community. Another example would be whether to tell a customer that senior managers at
a bank were repeating false rumors about the customer’s business practices. Assume that
these rumors could potentially do great harm to the customer’s business, but the managers
have the ability to fire the informant if they desire to do so. Further, assume that this
dilemma occurred during a recession, making the likelihood of finding another job
comparable to the one at the bank slim.
2.
In the first example I could have used any one of the guides presented in this chapter to
help me with my decision. I could have weighed the consequences of my decision, both
on the client’s business and on my family; I could have thought about how I would feel if
my decision was on the front page of the local newspaper; I could have used the principle
of caring—some of the clients were friends of mine. One of the most popular ethical tests
in business is the test of making something public. In fact, it is the test that Warren Buffet
employs at Berkshire Hathaway. If I had asked myself how I would feel if others knew
that I didn’t report the padding of the time sheets, I would have come forward to the
management of the law firm where the practice was taking place.
3.
Obviously, students will have different answers to this question. After all, philosophers
have been debating this very question for hundreds of years with no resolution! On the
consequential side, our society believes that results matter. What happens to people as a
result of my actions is very important. Students like teleological theories, especially
utilitarianism, because they often apply a cost-benefit approach to decision-making in their
other business coursework. However, teleological theories have trouble with questions of
rights and justice. We also think that there are some things that just should not be done,
regardless of the outcome (e.g., killing an innocent person or denying someone the right to
pursue his or her happiness). Many students will agree that there are certain moral and
legal rights that cannot be overridden by utility. I personally tend to favor the
deontological perspective—I believe there are things that should not be done regardless of
the consequences. I also think that the consequences of doing my duty, or “the right thing”
will almost always provide positive outcomes. However, when several moral and/or legal
rights conflict under the principle of rights or when there are multiple acceptable outcomes
using the principle of justice, I would use a teleological theory (e.g., utilitarianism) to
reach a final decision.
4.
Because ethical leadership is built upon management that embodies the characteristics of a
moral manager and a moral person, I would focus on these aspects of ethical leadership. A
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Chapter Notes
moral person exhibits (1) ethical traits (such as honesty, trustworthiness, etc. – the
foundation of virtue ethics), (2) ethical behaviors and (3) ethical decision-making. A
moral manager (1) serves as an ethical role model, (2) effectively communicates ethical
choices, and (3) uses effective rewards and discipline. Since research has shown that
behavior of superiors is the factor most likely to impact an organization’s ethical climate, I
believe that it would be paramount for me to serve as an ethical role model by
demonstrating ethical behavior, specifically exhibiting the traits of a virtue ethicist and
exercising ethical decision-making. I would strive to effectively communicate ethical
choices, through my own actions and through the implementation of the company’s code
of conduct and training courses. Finally, I would emphasize that there are rewards for
ethical behavior and punishments for unethical behavior and implement those measures
when appropriate.
5.
Codes of conduct, if embedded in the culture of a company, can provide effective guidance
to employees. Collins and Porras, in Built to Last, talk about the effects of “cult-like
cultures.” These cultures provide ideological control (assuring that employees look at the
world in similar ways) and simultaneous operational autonomy. An effective code of
conduct can provide a like result. In addition, the Sarbanes-Oxley Act of 2002 requires
public companies to have a code of conduct for senior financial officers or to publicly
disclose why they do not have this code. Finally, the Federal Sentencing Guidelines direct
prosecutors to consider “the existence and adequacy of the corporation’s compliance
program” (which includes an effective code of conduct), when determining whether to
charge an organization for the criminal actions of its agents. Unfortunately, in reality,
most codes of conduct are written to protect the company from its employees’ behaviors,
and many are little more than window dressing. On balance, like most things, codes of
conduct can be helpful if they are carefully written, properly implemented, uniformly
enforced, and embedded in the culture. And like most things, they can be harmful if
employees see them as hypocritical, window dressing, or applied capriciously.
6.
In my opinion, this question does not address the critical issue. Business ethics can be
taught. The subject matter is no more difficult to grasp than any other academic subject.
People have been making judgments about right and wrong all of their lives, using some
type of criteria (or maybe just instinct, as the authors point out). People can learn how to
use different ethical criteria. The more important, and much more relevant question is one
of motivation—Rest’s third component. Because of this, effective ethics training must
focus on the organization’s ethical climate, providing an atmosphere that is conducive to
and supportive of ethical decisions. As discussed in this chapter, employees of firms feel
pressured to compromise their ethics in pursuit of other (usually financial) goals. The
problem is not that people don’t know how to make ethical decisions—the problem is that
they are worried that doing the right thing will result in punishment rather than reward. So
the real question is whether senior managers (those who establish the ethical climate in
their organizations) can learn or be persuaded to establish climates that encourage and
reward ethical behavior first and foremost, not exclusive pursuit of profit; I believe that
current and future managers can be convinced to establish an ethical climate by studying
the economic and legal consequences of unethical and ethical behaviors.
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7.
Chapter Notes
The single most important factor in establishing a strong ethical climate is the commitment
and behavior of senior managers. These are the people in the organization who set the
standards of behavior for everyone else. If the senior managers authentically believe in
ethical behavior, and act that way themselves, there will be little difficulty in establishing
an ethical work climate. All of the other practices discussed in the textbook—
communicating effectively, establishing ethics programs, setting realistic performance
objectives, including ethics in the decision-making process, establishing codes of conduct,
disciplining violators, setting up hotlines, providing ethics training, performing ethics
audits and risk assessments, being transparent, and providing effective board oversight will
be helpful, but these measures will only be successful if senior management sets a moral
tone at the top.
GROUP ACTIVITY
Divide students into groups of four to five students. Instruct them to read the following scenario:
“Alex Smith is preparing a sales presentation for his company, Phones4Kids, which
manufactures and sells cell phones that are specifically designed for children. Phones4Kids
employs several hundred workers in Mooray, Missouri, a small town with only two other large
employers in addition to Phones4Kids. Alex hopes to sell specialty phones for boys and girls
aged 6-10 to a retailer in Hooptown, Missouri. This sale would represent approximately 25% of
the projected revenue for the current year for Phones4Kids. The phones are not specifically
designed for internet access; however, about eight percent of the time the phones can pick up a
wireless internet connection and the user can access the internet. There is a 48% chance that once
a child connects to the internet using one of these specialty phones, he or she could access a
pornographic site. Derrick Vance, Alex’s boss, has promised Alex a commission in addition to
his regular salary if he makes the sale to the retailer. However, if he tells the retailer about the
potential to access pornography via the cell phone, the retailer may buy the phones from a
competitor that sells phones without internet access. Alex has reviewed the corporate policy for
Phones4Kids and can find no specific guidance on how to handle this situation. However, the
policy does indicate that sales representatives are to be honest and fair in their dealings with
customers.”
Each group should determine how Alex should handle this situation in a written memo.
Specifically, the group should use the ethical decision-making process to reach a resolution to
the hypothetical. The group’s ethics screen should include an analysis of several ethical
principles and tests.
Instructors may want to have students use the following additional ethical decision-making
process, which builds on the process provided by the text but incorporates an economic and legal
analysis of proposed courses of action:
Step 1: State the Problem / Analyze the Problem
Step 2: Identify All Courses of Action that You Could Take
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Chapter Notes
Step 3: Evaluate Each Course of Action
A. Would the proposed course of action meet the firm’s economic responsibilities?
B. Would the proposed course of action meet the firm’s legal responsibilities?
C. Would the proposed course of action meet the firm’s ethical responsibilities?
1. Note the ethical principles / tests employed by top management.
2. Note the ethical principles / tests required by the code of conduct.
Step 4: Evaluate New Alternative (Repeat Step 3)
Step 5: Implement Chosen Course of Action
INDIVIDUAL ASSIGNMENT
Distribute the following instructions to each student:
Describe an ethical dilemma that you faced in the workplace. Analyze how you would resolve
the dilemma using (1) utilitarianism, (2) the principle of rights, (3) the principle of justice, (4)
virtue ethics and (5) the Golden Rule. Based on your analysis of these principles, what course of
action would result in the most ethical outcome? Determine what ethical principle(s) or tests(s),
if any, were employed by senior management or required by the company’s code of conduct.
Finally, describe the course of action that you took in the situation and ascertain whether you
would choose the same course of action again or if you would act differently based on your
analysis of the ethical principles, management’s behavior and the requirements (if any) of the
company’s code of conduct.
Principles Approach to Ethics
Teleological Theories
Egoism
Utilitarianism
Deontological and Nonteleological Theories
Kant
Rights
Justice
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Chapter Notes
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
Gag Test