Business Ethics

ethics.ppt (bus1301)


Essence of Ethics Morally Questionable Acts

Dynamic Relationships that Affect Ethical Decision Making

Factors Affecting Ethical Decisions Norms and Counter-norms

Managing Ethics


TEXACO TEXACO -- racial discrimination $176 M

MERCURY FINANCEMERCURY FINANCE - - overstating profit $ 2.2 B

ADMADM - - price fixing $100 M

GENETECHGENETECH - - tying personal loan to business deal CEO loses job

BANKER’S TRUSTBANKER’S TRUST - - deliberately misled or deceived customers Damaged

image

W.R. GRACEW.R. GRACE - - sexual harassment CEO loses job

BAUSCH & LOMBBAUSCH & LOMB - - manipulation of accounting data earnings fell 54%


1. Responsibility to address corporate issues (58% Execs)

2. Corp. leaders’ responsibility is to the greatest good (52% Execs; 35% MBAs)

3. Switch brands (76% consumers)

4. Skepticism about ‘cause’ related marketing (58% consumers; 21% today)

5. Do not buy (75% consumers)

58% execs

52% execs

35% MBAs

76% consumers

58% consumers21% today

75% consumers


1. Social responsibility is important (26% investors)

2. Company image (84% employees)

3. Innovative workplace practices associated with productivity

4. Employee ownership leads to productivity (60% companies)

5. Business has too much power (71 %)

6. Corporate role is more than to make a profit (95%)

1. 26% investors

2. 84% employees

4. 60% companies

5. 71%

6. 95%


- Corporate layoffs - theft

- Wall Street sins - selling products that do not meet specs.

- Pentagon fraud

- age discrimination - retaliation against employees who exposed

unsafe/illegal practices

- price fixing

- use of banned chemicals

- power in the market place

* Who is responsible? “Captain of the ship?”

* Does profitability excuse questionable behavior?

Profit at Any Cost


Codes do not produce ethical behavior.

Our ethics tend to flow from our core values.

People have intrinsic worth.


Conflicts of interest lead to ethical problems

Individual behavior is strongly influenced by incentive

Self-regulation and standard setting organizations fall short


Get support by CEO for support of key stakeholders

Get stakeholders participation Expand words/ phrases into expectations Establish feedback mechanism Assure implementation/ monitoring of

results Reward employees who perform and

deliver on values


Non-job failures:– Cheating on your expense accounts– Stealing supplies– Sandbagging

Job failures:– Superficial performance appraisal– Not confronting expense account– Cheaters– Falsely praising poor performers– Denial of training opportunities– Undermine management


Job distortions:– Bribery– Manipulation of suppliers/buyers– Differential pricing– Falsifying information

Job “creation”:– Bending policies for certain customers– Bending policies for salespeople– Caught violating rules– Arranging for promotions


FACTORS AFFECTING ETHICAL DECISIONS

UNCERTAINTY OF

INPUTS

CENTRALITY OF

WORKFLOW

SUBSTITUTABILITYOF

ACTIVITIESPREVENTIVE

ROUTINIZATION

COPINGROUTINIZATION

POWER

CONTROL OFETHICAL

CONTINGENCIES

BEHAVIOR


A General Framework of the Ethical Decision-Making Process

ETHICAL SITUATION

CHARACTERISTICS OF THE DECISION MAKER

SIGNIFICANT INFLUENCES

OUTCOMESDECISION


Individual Characteristics of the Decision Maker that Influence the Ethical Decision-Making Process

ETHICAL SITUATION



OUTCOMESDECISION

* Achievement motivation * Knowledge* Need for affiliation * Experience* Ego strength * Risk taking* Locus of control * Machiavellianism


Outcomes that Result from the Ethical Decision-Making Process

ETHICAL SITUATION



OUTCOMESDECISION

* Performance * Feedback* Rewards * Promotions* Satisfaction * Learning


Significant Influences on the Ethical Decision-Making Process

ETHICAL SITUATION



OUTCOMESDECISION

* The organization * Technology* Work * Significant others; customers,* The law peers, immediate supervisor,* Economics top managers, family, friends,* Professionalism other “opinion leaders”


Elements of the Ethical Situation

ETHICAL SITUATION



OUTCOMESDECISION

* Opportunity

* Ethical decision history

* Moral intensity of the situation

Elements of the Ethical Decision-Making Process

Characteristics of Decision Makers

Significant Influences

Outcomes

PERCEIVED ETHICAL PROBLEM

PERCEIVED ALTERNATIVES,

PRODUCT, PRICE, PROMOTION,

DISTRIBUTION INFO

PERCEIVED CONSQUENCES

ELEMENTS OF THE DECISION

Information acquiredInformation processed

Ethical decision historyExpectationsSent and received rolesEthics norms (personal & those of others)

Information acquiredInformation processed

Probability of consequencesDesirability of consequences

JUDGMENT

DECISIONEthical

Situation


ORGANIZATION A

ORGANIZATION B


NORMS LT relationships with customers Objectivity Openness Candor Honesty Flexibility/Adaptability Cost-effectiveness Taking responsibility Customer Service Develop younger salespeople Team effort Consensus Loyalty

COUNTERNORMS Sandbagging

Emotional Involvement Secrecy Stonewalling Lying Dogmatism Padding expenses Passing the buck Sales force Look out for “Number 1” Individual goals first Taking unfair credit Criticize the company


The OLD Ethic FavorsWorkSavingsResponsibilityCompetitionSex rolesSacrificeEquality - InequalityWealth accumulationAbsolutionRisk assumptionEfficiency/ProductivityThrift/Investment

The NEW Ethic FavorsLeisureDebtRightsProtectionUnisexismSelf-interestEqualityWealth redistributionSituationalismRisk aversionQuality of lifeConsumerism


Diagnose the reward system

Analyze rules and procedures

Training and education

Develop investigative structures


Leaders exhibit moral courage by being willing to make personal sacrifices

Leaders should not become to preoccupied with pleasing constituents

Leaders focus on needs of others - they have a commitment to serve

Business as usual may be evidence of a leadership failure


Determination and a winning personality equal success

Employees rarely complain Employees take their cues from

management Top management actions are more

important than codes of ethics Employees wrestle with the short-run

vs. long-run

CEO’SCEO’S Set the Tone for How to HandleSet the Tone for How to Handle Questions ofQuestions of EthicsEthics

(HymowitzHymowitz)


THE ESSENCE OF ETHICS I(Article by Williams)

Codes of ethics do not necessarily lead to ethical behavior.

The core values we profess are not necessarily those by which we live.

There is a place for compassion in leadership.

Bureaucracy can come in conflict with ethics. Managers who vent their frustration on

subordinates (who can do little about it) are not acting ethically.


THE ESSENCE OF ETHICS II(Article by Williams)

Study the ethics of organizations which have reputations for being ethical.

Build ethics into organization policies and practices.

Make sure quality and service and integrity permeate the entire organization.

Develop high expectations of all members of your organization.


THE ESSENCE OF ETHICS II (Article by Williams)

Create an organizational culture that

encourages...… open and honest communication

continual learning personal development

respect for people


Background Slides

You will be Responsible for this Material!


Company Threats to Ethical Behavior

A firm that… routinely ignores or violates internal codes of ethicsalways looks for simple solutions to ethical problems and

is satisfied with “quick fixes”unwilling to take an ethical stand when there is financial

cost to the decisioncreates an internal environment that either encourages

unethical behavior or discourages ethical behaviorusually sends its ethical problems to the legal department looks at ethics solely as a public relations tool to enhance

its image


Company Threats to Ethical Behavior

A firm that… treats its employees differently from its customers is unfair or arbitrary in its performance appraisal standardshas no procedures or policies for handling ethical

problemsprovides no mechanisms for internal whistle-blowing lacks clear lines of communication within the organization is sensitive only to the needs of shareholdersencourages its employees to leave their personal ethical

values at the door


FIVE WARNING SIGNS OF ETHICAL COLLAPSE (Jennings article)

surround yourself with subordinates who are young, inexperienced, enthralled with power and deep in debt

send a clear message that you expect results at any cost

be certain the CEO is tyrannical and prone to anger

when an employee’s public statements bring criticism to the company, cut the employee loose

when an ethical lapse is discovered, never admit anything. Conceal, spin and gloss.


Do College Honor Codes Make Moral Sense Do College Honor Codes Make Moral Sense on Today’s Campus?on Today’s Campus?

(Brownfield)(Brownfield)

Information on College Students 70% have cheated on a test at least once 87% have cheated on some type of written work 49% have collaborated with others on an assignment 52% have copied from someone 87% business majors have cheated at least once

Conclusion: grade > learning short-run > long-run

chaos > standards negligence > integrity

laziness > diligence


Is an Honor Code a reasonable ideal for

Today’s students??? Today, we have a… Questionable moral climate, Lack of strong, value-based up-bringing, and Celebration of negative role models

Do College Honor Codes Make Moral Sense Do College Honor Codes Make Moral Sense on Today’s Campus?on Today’s Campus?

(Brownfield)(Brownfield)


Can we arrive at consistency in global ethics standards?– Companies are identified by their corruption– Who will want to partner with such

companies?


PR vs. Performance

Real transformations require a change in core values, attitudes, relationships, leadership with experience for change

Sound organizations provide freedom to act, but also have some controls

A culture built around “star players” cannot foster teamwork


Chapter #5 - Conducting Business Ethically and Responsible

Companies must be committed to ethics Codes Ethics Programs Ethics Orientation

Social Responsibility Not the same as

ethics Related to ethics

Company Responsibilities Customers Employees Investors Others


Chapter #5 - Conducting Business Ethically and Responsible

Can businesses that conduct themselves in an ethical way be profitable?

How can ethical behavior be encouraged?

What do short-term and long-term thinking have to do with ethics?


You Will be Responsible for this Material on the TEST


ACTIONS ADVANTAGES DISADVANTAGES

Alternative Courses of Action Available in Ethical Situations

NOT THINK ABOUT IT

GO ALONG & GET ALONG

PROTEST

Avoids the danger of getting into a zero-sum game with colleagues

Same as “not think about it”

Individual feels good about making effort to stop unethical behavior

The risk of going in the wrong direction

Same as “not to think about it” Individuals slowly conform… maybe to the wrong direction

Organization disregards protest & punishes protester




CONSCIENTIOUSLY OBJECT

LEAVE

Makes clear statement that one person feels that action is unethical

Person feels good about self for making effort to stop unethical behavior

Signals that organization will lose good people if unethical behavior continuesPerson who leaves may join a competitor, feels better because he/she did not cooperate with unethical behavior

Few organizations recognize individual rights to object

May hurt chances for rewards and advancement

Most people are replaceable and if replacement cooperates with unethical behavior, what is gained?




SECRETLY BLOW THE WHISTLE

PUBLICLY BLOW THE WHISTLE

SECRETLY THREATEN TO BLOW THE WHISTLE

Can be very effectiveIf whistle-blower remains secret, retaliation cannot occur

Can be effectiveWhistle-blower may be treated as a hero by many

Can be very effectiveWhen it works, organization is not hurt by bad publicity

- Feelings of cowardice - Creation of atmosphere of mistrust - What will whistle-blower do if confronted by firm - tell the truth or lie?

- Organization may attack the whistle-blower - It is difficult to interact with those one is criticizing - It may be difficult to work with those who hold a grudge

- Does not permit dialogue between upper&lower managers - Might prevent injured consumers or clients from receiving remedies




SABOTAGE

NEGOTIATE

Can be effective

Identity of saboteur might be protected

Individual action may lead to small-group consensus that will be more effective than individual action

Win-win solutions are possible

Sabotage is not dialogue

Retaliation might occur against the saboteur or against others

Innocent people may be fired

Does not work well in situations that are zero-sum, lose-win, in nature

Individual who perceives ethical problem may not know how to negotiate, my lose “cool”

SELECTED PRINCIPLES OF ETHICAL CONDUCT

KANT’S CATEGORICAL IMPERATIVE: Act in a way that you believe is right and just for any other person in a similar situation.

CARR’S CONVENTIONALIST ETHIC: Bluff and take advantage of all legal opportunities and widespread practices and customs

THE DISCLOSURE RULE: Ask how it would feel to see the thinking and details of the decision disclosed to a wide audience

THE GOLDEN RULE: Look at the problem from the position of another party affected by the decision and try to determine what response the other person would expect as the most virtuous


THE HEDONISTIC ETHIC: Do whatever you find to be in your own self-interest

MOORE’S INTUITION ETHIC: Go with your “gut” feeling or what you understand to be right in a given situation

SMITH’S MARKET ETHIC: Take selfish actions and be motivated by personal gains in business dealings

MACHIAVELLI’S MEANS-END ETHIC: Ask whether some overall good justifies any moral transgression

NIETZSCHE/MARX MIGHT-EQUALS-RIGHT ETHIC: Seize what advantage you are strong enough to use without respect to ordinary social conventions and laws


THE ORGANIZATION ETHIC: Ask whether actions are consistent with organizational goals and do what is good for the organization

GARRETT’S PRINCIPLE OF PROPORTIONALITY: Do whatever you will if there is a proportional reason for doing so

THE PROTESTANT ETHIC: Do only that which can be explained before a committee of your peers

THE REVELATION ETHIC: Pray, mediate, or otherwise commune with a superior force or being

BENTHAM / MILL’S UTILITARIAN ETHIC: Determine whether the harm in an action is outweighed by the good

MORAL TYPES DESCRIPTORS Hedontist

Profit- maximizer

Socialite

1. Make physical pleasures the supreme goal in their lives.

KEY QUESTION: Which course of action will yield the greatest pleasure?

2. Goal of making as much money as possible KEY QUESTION: which course of action will make

the most money? All their feelings and associations can be melted

down to dollars

3. A social butterfly, a party animal KEY QUESTION: Which course of action will help

me best get along with the group? If you want to know what this person thinks, find

out who spoke to him or her most recently

MORAL TYPES DESCRIPTORS4. Life centers around power and glory. KEY QUESTION: Which course of action will increase

my power and glory? These people have enormous egos, boundless

ambitions, and undertake reckless actions.

5. Spiritual values predominate KEY QUESTION: which course of action will help me

become a better person? These people have new insights, reform old ways,

initiate new ways of thinking, strike out on new paths

6. A technician POSITIVES: Creative, knowledgeable, independent,

self-reliant, hardworking NEGATIVES: Sadistic, forceful, manipulative, non-

trustworthy

Politician

Self-actualizer

Craftsman

MORAL TYPES DESCRIPTORS

7. Main goal in life to belong to an organization POSITIVES: Service oriented, loyal,

responsible, humble, sensitive to the needs of others, dependable, pleasant, trustworthy

NEGATIVES: Fear, worry, dependency, lacking vision, risk aversive, low drive, indecisive, change resistant

8. Dominant goal in life to gain prestige, glory, fame

POSITIVES: Inventive, flexible, change oriented, competitive, team player, independent, risk taker, impartial, high energy, idealistic

NEGATIVES: Lack of conviction, rebellious, manipulative, lack of intimacy, lonely

Company person

Gamesman


PERSONAL MORAL DEVELOPMENT

1. Physical consequences determine moral behavior. Avoidance of punishment and deference to power are typical of this stage

2. Individual pleasure needs are the primary concern and dictate attitudes toward behavior

ORGANIZATIONAL MORAL DEVELOPMENT

1. Social Darwinism - Fear of extinction and the urgency of financial survival dictate moral conduct. The direct use of force is the acceptable norm.

2. Machiavellianism - Organizational gain guides actions. Successfully attaining goals justifies the use of any effective means, including individual manipulation

Models of Personal and Organizational Moral Development

PERSONAL MORAL ORGANIZATIONAL MORAL

DEVELOPMENT DEVELOPMENT



3. The approval of others determines behavior. The good person is one who satisfies family, friends, associates.

4. Compliance with authority, upholding of the social order, and “doing one’s duty” are primary concerns


3. Cultural conformity - A tradition of standard operating procedures and caring groups. Peer professional pressure to adhere to social norms dictates what is the right and wrong behavior

Allegiance to authority- Directions from legal authority determine moral standards. Right and wrong are based on the decisions of those with legitimate hierarchical power


PERSONAL MORAL ORGANIZATIONAL MORAL DEVELOPMENT DEVELOPMENT



5. Democratic participation - Participation in decision-making reliance on majority rule become organizational moral standards. Participative management becomes institutionalized

Organizational integrity- Justice and individual rights are the moral ideals. Balanced

judgment between competing interests shapes organizational character which, in turn, determines the validity of the behavior


5. Tolerance for rational dissent and acceptance of majority rule become primary ethical concerns

6. What is right and good is a matter of individual conscience and responsibly chosen commitment. Morality is based on principled personal convictions


PERSONAL MORAL ORGANIZATIONAL MORAL DEVELOPMENT DEVELOPMENT

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