Business 303 SheppardBusiness 303 Sheppard Business 303 SheppardBusiness 303 Sheppard

Business Society & Ethics, Week 8:

Organizational Ethics

Business Society & Ethics, Week 8:

Organizational Ethics

Wk. 8-2

BUSINESS ETHICS WEEK 8: BUSINESS ETHICS WEEK 8: MAIN QUESTIONSMAIN QUESTIONS

1.1. What are the individual failures that lead What are the individual failures that lead to organizational problems with the truth?to organizational problems with the truth?

2.2. What is a lie?What is a lie?

3.3. What would make lying acceptable?What would make lying acceptable?

4.4. Is business a special case?Is business a special case?

5.5. Does it pay to lie?Does it pay to lie?

6.6. Are privacy & secrecy a special case?Are privacy & secrecy a special case?

Wk. 8-3

1a.1a. Autocracy Autocracy: : SymptomsSymptoms // Side-effectsSide-effects (1(1 ofof 6)6)

• WorkaholismWorkaholism– Not just a work ethicNot just a work ethic– Relations to othersRelations to others– Business schools? Business schools? – Physical & psychological harmPhysical & psychological harm– EthicsEthics

• Fixed focus on work lends itself to faulty moral Fixed focus on work lends itself to faulty moral decision making. A “success at any cost!” attitude decision making. A “success at any cost!” attitude prevails. Others are seen as means to a desired end. prevails. Others are seen as means to a desired end.

The obsession is justified by pointing out how The obsession is justified by pointing out how success at work makes the individual a major success at work makes the individual a major contributor to the greater good.contributor to the greater good.

Wk. 8-4

1b.1b. Autocracy Autocracy: : SymptomsSymptoms // Side-effectsSide-effects (2(2 ofof 6)6)

• GroupthinkGroupthink (1/2)(1/2)

– GrandiosityGrandiosity– Management will solve itManagement will solve it– ScapegoatingScapegoating– Ethics & LoyaltyEthics & Loyalty

– Over-conforming nature the groupthink process Over-conforming nature the groupthink process lowers the quality of moral decision making. lowers the quality of moral decision making.

The groupthink process internalizes its own The groupthink process internalizes its own expertise and fails to assess its own moral expertise and fails to assess its own moral position from outsider’s perspective.position from outsider’s perspective.

Wk. 7-5

Groupthink: (2/2)(2/2) Principles to reduce it:

• Foster critical thinking in membersFoster critical thinking in members• Don’t proselytize about a preferred outcomeDon’t proselytize about a preferred outcome• Assign the devil's advocate role to 1 or 2 Assign the devil's advocate role to 1 or 2

(Their duty: challenge assumptions & reveal costs)(Their duty: challenge assumptions & reveal costs) • Insist upon full & open participation by allInsist upon full & open participation by all• Emphasize reality testing over consensus as Emphasize reality testing over consensus as

a test of the solution to be implementeda test of the solution to be implemented• Have a second-look meetingHave a second-look meeting• Foster, at set times, the group’s examination Foster, at set times, the group’s examination

of its problem-solving processesof its problem-solving processes

1b.1b. Autocracy: Autocracy: SymptomsSymptoms // Side-effectsSide-effects (3(3 of 6)of 6)

Wk. 8-6

• Escalation Escalation (1/2)(1/2) – Love of conflictLove of conflict– Self-destructivenessSelf-destructiveness– DenialDenial– EthicsEthics

– An entrapped administrator in an escalation An entrapped administrator in an escalation processes fails to deal with threatening processes fails to deal with threatening situations since these will prove that a previous situations since these will prove that a previous decision by the decision maker was wrong. decision by the decision maker was wrong.

In covering up, decision maker plays loose with In covering up, decision maker plays loose with the factsthe facts

1c.1c. Autocracy: Autocracy: SymptomsSymptoms // Side-effectsSide-effects (4(4 ofof 6)6)

Wk. 7-7

• Situational & behavioral entrapment traits:Situational & behavioral entrapment traits: – A prior investment in the pursuit of the goalA prior investment in the pursuit of the goal– A choice between, getting into or out of a situation A choice between, getting into or out of a situation – Conditions of uncertainty surrounding the decision Conditions of uncertainty surrounding the decision – A repeated series of investment decisions.A repeated series of investment decisions.

• The behavioral or response components: The behavioral or response components: – At each decision, continue debate over future steps At each decision, continue debate over future steps

increases / highlights “avoid” & “attract” featuresincreases / highlights “avoid” & “attract” features – Trapped administrators will shift from rational & Trapped administrators will shift from rational &

econ. to social psych. involvement in the situation econ. to social psych. involvement in the situation – Behavior self-perpetuates as added investments Behavior self-perpetuates as added investments

increase degree of commitment increase degree of commitment over-commitmentover-commitment

1c.1c. Autocracy: Autocracy: SymptomsSymptoms // Side-effectsSide-effects (5(5 ofof 6)6)

Escalation (2/2)(2/2) results from:

Wk. 7-8

1d.1d. Autocracy: Autocracy: SymptomsSymptoms // Side-effectsSide-effects (6(6 ofof 6)6)

• Diffusion of responsibility– Result of autocracyResult of autocracy– IndifferenceIndifference– EthicsEthics– Tragedy of commonsTragedy of commons

Case of WorldCom [615-619] Case of WorldCom [615-619] Kitty Genovese @ Kew Gardens Kitty Genovese @ Kew Gardens Breann Voth @ the Coquitlam River?Breann Voth @ the Coquitlam River?

– Moral dilemmas in business are particularly Moral dilemmas in business are particularly susceptible to diffusion of responsibility. susceptible to diffusion of responsibility.

Few see their prime task in the firm as attending Few see their prime task in the firm as attending to the moral portfolio. Attention often lapses or is to the moral portfolio. Attention often lapses or is taken seriously only when it becomes a crisis.taken seriously only when it becomes a crisis.

Wk. 8-9

2. 2. A Short Story A Short Story (or what is a lie?)(or what is a lie?) (1 of 3)(1 of 3) “ “ A certain abstemious ascetic was known for his A certain abstemious ascetic was known for his

probity, propriety, asceticism, and worship, and probity, propriety, asceticism, and worship, and became famous for this. became famous for this.

“ “ He feared the tyrannical sovereign and decided to He feared the tyrannical sovereign and decided to run away from his city. run away from his city.

“ “ The sovereign’s command went out that he is to be The sovereign’s command went out that he is to be searched for and arrested wherever he is found. searched for and arrested wherever he is found.

“ “ He could not leave from any He could not leave from any one of the city’s gates and was one of the city’s gates and was apprehensive lest he fall into apprehensive lest he fall into the hands of the sovereign’s men. the hands of the sovereign’s men.

Wk. 8-10

2. 2. A Short Story A Short Story (or what is a lie?)(or what is a lie?) (2 of 3)(2 of 3) “ “ So he went and found a dress that is worn by So he went and found a dress that is worn by

vagabonds, put it on, carried a cymbal in his hand, vagabonds, put it on, carried a cymbal in his hand, pretended to be drunk early at night, and came out pretended to be drunk early at night, and came out

to the gate of the city singing to the accompaniment to the gate of the city singing to the accompaniment of that cymbal. of that cymbal.

“ “ The gatekeeper said to him, ‘Who are you?’ ‘I am so The gatekeeper said to him, ‘Who are you?’ ‘I am so and so, the ascetic?’ he said in a jocular vein. and so, the ascetic?’ he said in a jocular vein.

“ “ The gatekeeper thought he was The gatekeeper thought he was poking fun at him and did not poking fun at him and did not interfere with him. So he saved interfere with him. So he saved himself without having lied in himself without having lied in what he said. ”what he said. ”

-Alfarabi, -Alfarabi, Plato’s LawsPlato’s Laws

Wk. 8-11

2. 2. A Short Story A Short Story (or what is a lie?)(or what is a lie?) (2 of 3)(2 of 3) • Really, did he lie?Really, did he lie?

• Is there a falsehood involved?Is there a falsehood involved?

• When does a misleading statement When does a misleading statement become a lie?become a lie?

Wk. 8-12

3. 3. Three thinkers on Honesty [58]Three thinkers on Honesty [58]

• Aristotle – Truth as VirtueAristotle – Truth as Virtue

• Kant – Lies as a violation of the Kant – Lies as a violation of the

Categorical Imperative Categorical Imperative

• Mill – Lying as having long term Mill – Lying as having long term

bad bad

consequences consequences

Wk. 8-13

4. 4. Does it Pay to Lie? Does it Pay to Lie? (1/3)(1/3) Business Bluffing?Business Bluffing? • Is there a special case for Business?Is there a special case for Business?

– Built-in obsolescenceBuilt-in obsolescence– Pressure to deceivePressure to deceive– The poker analogyThe poker analogy– ‘‘We don’t make the laws’We don’t make the laws’– Cast illusions asideCast illusions aside

Wk. 7-14

4. 4. Does it Pay to Lie? Does it Pay to Lie? (2/3)(2/3) • Adversarial Relationships [67] Adversarial Relationships [67]

• Internal and External costs [68]Internal and External costs [68]

• Is it ever right to lieIs it ever right to lie [69-72]?[69-72]?– The effort The effort (& cost)(& cost) of lying of lying– The diminishing of trustThe diminishing of trust– The duty not to lieThe duty not to lie

Do you really

expect politicians to tell the truth.

Do you really

expect politicians to tell the truth.

Wk. 7-15

4. 4. Does it Pay to Lie? Does it Pay to Lie? (3/3)(3/3) • Types of Lies [71]Types of Lies [71]

– Less than the whole truthLess than the whole truth– The biased truth with self interestThe biased truth with self interest– Idealizing ones own product or serviceIdealizing ones own product or service– Misleading informationMisleading information

• True statements intended to be misinterpretedTrue statements intended to be misinterpreted

– Stating obvious falsehoodsStating obvious falsehoods– Stating vicious falsehoodsStating vicious falsehoods

• Planned responses [85]Planned responses [85] – The zombie image [71]The zombie image [71]

• GroupthinkGroupthink

Break TimeBreak Time

Wk. 8-16

5. 5. The Logic of TrustThe Logic of Trust• Game theory and the Prisoners' DilemmaGame theory and the Prisoners' Dilemma

• Transactions CostTransactions Cost• Tit for tat Tit for tat (Axelrod)(Axelrod)

SilenceSilence Kenny Kenny RatRat

SilenceSilence

Kyle Kyle

RatRat

3 years each in Jail

5 Years each in Jail

Ken 1 yearKen 1 year Kyle 10 yrs.Kyle 10 yrs.

Ken10 yrs.Ken10 yrs. Kyle 1 yrs.Kyle 1 yrs.

$7 benefit each per transaction

$3 benefit each per transaction

Ken $10Ken $10 benefit benefit Kyle $ 1 benefit Kyle $ 1 benefit per transactionper transaction

Ken $ 1Ken $ 1 benefit benefit Kyle $10 benefit Kyle $10 benefit per transactionper transaction

TrustTrust Kenny Kenny LieLie

TrustTrust

KyleKyle

LieLie

Wk. 7-17

6.6. Privacy,Privacy, SecrecySecrecy && TransparencyTransparency (1/2)(1/2)

• Definition of privacy [73]Definition of privacy [73]

• Deception versus Deception versus Secrecy [75, 77]Secrecy [75, 77]– EqualityEquality– Partial individual controlPartial individual control– Full controlFull control

Wk. 8-18

6. 6. Privacy,Privacy, SecrecySecrecy && TransparencyTransparency (2/2)(2/2)

• Working on transparencyWorking on transparency– 3 types of feedback [79]3 types of feedback [79]

EvaluativeEvaluative InterpretiveInterpretive DescriptiveDescriptive

– What makes feedback effective [79-81]What makes feedback effective [79-81]– The Potemkin village problemThe Potemkin village problem

‘‘Potemkin village’ as any hollow or false Potemkin village’ as any hollow or false construct, physical or figurative, meant to hide construct, physical or figurative, meant to hide an undesirable or potentially damaging situationan undesirable or potentially damaging situation

• Transparency International [88]Transparency International [88]– The need for mutual trust beyond law [65]The need for mutual trust beyond law [65]– ISO to the Rescue?ISO to the Rescue?

Wk. 8-19

7a. P7a. Problems: roblems: (1 of 2)(1 of 2) Why Lies Fail [85-91]Why Lies Fail [85-91]

• Betrayal by cluesBetrayal by clues– Lack a practiced lie / Poor lie / Body lang.Lack a practiced lie / Poor lie / Body lang.

• Detection apprehensionDetection apprehension– Lying about Feelings / Feelings about lyingLying about Feelings / Feelings about lying

• Fear of punishmentFear of punishment• Psychopathy Psychopathy

(Should we train ‘em?)(Should we train ‘em?)

• Shame versus guiltShame versus guilt

Wk. 8-20

7b. 7b. Problems: Problems: (2 of 2)(2 of 2) Can there be too much trust? Can there be too much trust?

• Types of trust [91-93]Types of trust [91-93]– Simple TrustSimple Trust– Blind TrustBlind Trust– Authentic TrustAuthentic Trust

• Dialogue that creates trust [94]Dialogue that creates trust [94]

Case 3.3 [96]:Case 3.3 [96]: Blindsided by BankruptcyBlindsided by Bankruptcy

Wk. 8-21

8. 8. Management Gurus = Liars?Management Gurus = Liars?• The ‘Japan craze’ of the 1980sThe ‘Japan craze’ of the 1980s

• And the Hollowing out of the CorporationAnd the Hollowing out of the Corporation

• Science or a quick fix? [83]Science or a quick fix? [83]

• Risk awarenessRisk awareness

Wk. 8-22

9.9. Solomon on Business Ethics Solomon on Business Ethics (1 of 2)(1 of 2)

• Myth of Amoral Myth of Amoral (not Immoral)(not Immoral) Business Business – Business and Ethics don’t mixBusiness and Ethics don’t mix

Morals are out of place in a profit making worldMorals are out of place in a profit making world

• Ethical Businesses are successfulEthical Businesses are successful– Ethics as a good business practiceEthics as a good business practice

The ‘practice’ of business ethics for long term The ‘practice’ of business ethics for long term survival survival (a professional way of life)(a professional way of life)

• Be aware of the 3 Cs of Business EthicsBe aware of the 3 Cs of Business Ethics – Compliance with the rulesCompliance with the rules

– Contributions bus.Contributions bus. can can make to societymake to society

– Consequences of business activityConsequences of business activity

Wk. 8-23

9.9. Solomon on Business Ethics Solomon on Business Ethics (2 of 2)(2 of 2)

• Thinking of Ethics as rules of the gameThinking of Ethics as rules of the game– Consider other peoples’ well beingConsider other peoples’ well being – Think as a member of the business Think as a member of the business

community community (not as an isolated individual)(not as an isolated individual)

– Obey, but don’t depend solely on the lawObey, but don’t depend solely on the law– Think of you & your corp. as part of societyThink of you & your corp. as part of society– Obey moral rulesObey moral rules– Think Objectively Think Objectively (from others’ perspectives)(from others’ perspectives)

– Ask: Ask: What sort of person would do such a thingWhat sort of person would do such a thing

– Respect the customs of others but not at the Respect the customs of others but not at the expense of your own ethicsexpense of your own ethics

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