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Chapter Six

Leadership Ethics and Social

Responsibility

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Learning Objectives

Specify key principles of ethical and moral leadership.

Apply a guide to ethical decision making.

Present representative examples of unethical behavior by business leaders.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Learning Objectives (cont’d)

Describe what leaders can do to foster an ethical and socially responsible organization.

Explain the link between business ethics and organizational performance.

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Ethics and Morals

Ethics is the study of moral obligations, or of separating right from wrong Ethics can also mean the accepted

guidelines of behavior for groups or institutions

Morals are an individual’s determination of what is right or wrong and are influenced by an individual’s values

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Ethical Leadership Behaviors

1. Be honest and trustworthy and have integrity in dealing with others

2. Pay attention to all stakeholders3. Build community4. Respect the individual5. Accomplish silent victories

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Factors Contributing toEthical Differences

1. The leader’s level of greed, gluttony, and avarice2. Rationalization3. Implied permission to engage in unethical acts4. The leader’s level of moral development

Preconventional level Conventional level Postconventional level

5. A sense of entitlement6. The situation and organizational culture7. The leader’s character

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Extraordinary Executive Compensation

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Executive Compensation in the U.S.

The average CEO pay at major corporations is now

364 times higher than the lowest-paid employees.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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The Ethical Mind for Leaders

To remain ethical, leaders need to develop an ethical mindset, or point of view

Leader’s need to state this viewpoint and apply it rigorously, using self-checks along the way

Leader’s must act quickly and publicly on lapses of ethical behavior of others

The ethical mind of the leader is essential for the overall health of the organization

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Evaluating Ethics of a Decision Guidelines

Is it right? Is it fair? Who gets hurt? Would you be comfortable if the details of

your decision or actions were made public?

What would you tell your child, sibling, or young relatives to do?

What does your intuition tell you?

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Examples of Unethical Leaders(From Table 6- 3)

Dennis Kozlowski, Tyco Bernie Ebbers, MCI Patricia Dunn, Hewlett-Packard Frank Quattrone, Crédit Suisse Steven Jobs, Apple Chung Mong-koo, Hyundai Martha Stewart, Martha Stewart

Living

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Social Responsibility

Having obligations to society beyond the company’s economic obligations to owners or stockholders and also beyond those prescribed by law or contract

Relates to an organization’s impact on society and goes beyond doing what is ethical

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Socially Responsible Actions

Creating a pleasant workplace Guarding the environment Engaging in philanthropy Working with suppliers to improve

working conditions

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Creating an Ethical and Socially Responsible Culture

Providing strategic leadership of ethics and social responsibility

Establishing written codes of ethical conduct

Developing formal mechanisms for dealing with ethical problems

Accepting whistleblowers Providing training in ethics and social

responsibility Placing company interests over personal

interests

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Ethics and Performance High ethics and social responsibility

are related to good financial performance

The relationship between social responsibility and financial performance may be a virtuous circle. Corporate social responsibility and corporate financial performance may feed and reinforce each other

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Summary

Key principles of ethical leadership include having honesty and integrity, paying attention to all stakeholders, building community, respecting the individual, and accomplishing silent victories

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Summary (cont’d)

Examples of factors contributing to how one person’s ethics differ from another include: the person’s level of greed, gluttony, and avarice, the person’s level of moral development, the person’s sense of entitlement, the situation itself, combined with the corporate culture, and/or the person’s character.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Summary (cont’d)

A leader or manager should seek answers to a series of important questions before reaching a decision about an issue that is not clearly ethical or unethical

Unethical behaviors have had detrimental effects on many companies

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Summary (cont’d)

A leader can encourage ethical behavior by promoting social responsibility

Ethical behavior is related to financial performance