Management Communication About

EthicsThe Difficulties of Managing for

Ethics

Vocabulary: “Business Ethics”

•What is “Business” ?

•What is “Ethics” ?

Business is inherently social

• Business has its own culture• Enron, Paypal, your office

• Business Transforms Culture• Kiewit, FNB, community outreach

• Business is about relationships• Workers, subcontractors, suppliers

Business: Its purpose/goal

• Lone Ranger/I am an Island View:

The purpose of business is to make me money, and increase stockholder value

(Milton Friedman)

Alternate Stakeholder View:

• Business should make money, but it has many stakeholders– groups/individuals who have a stake in what the business does. Owners are not the only one’s with a stake (Freeman)

Your business behavior makes the world Better or Worse for people:

• The way you treat your customers

• The way you treat your employees or coworkers or patients

• The way you treat your boss/company

• The way you contribute to the local community

Responsibilities in Business:

• To your employer

• To Customers

• To employees

• To boss/es

• To your community

• To your family

• To your God

“Ethics” isn’t “legal” Difference between the Law and Ethics:

• Some legal issues are neither ethical or unethical.

• Some ethical issues have no laws to support them.

• Law often tries to encourage ethical behavior:

– Better to have self-regulation than more gov’t regulations

Compliance and Ethics Program

Compliance with Laws

Ethical Behavior

SWEET SWEET SPOTSPOT

Ethics and Regulation

• Government regulation often is designed to promote ethical behavior:– SOX– OSHA Regulations– EPA Regulations– Federal Sentencing Guidelines

Federal Sentencing Guidelines

• 1. Having Standards• 2. Assigned Responsibility - Adequate

Resources• 3. Due diligence in Hiring• 4. Communications and Training• 5. Monitoring, Auditing, Reporting• 6. Promotion and Enforcement of Ethical

Conduct• 7. Reasonable Steps to Prevent Misconduct

Company Ethics

• Company Policy often has some basis in the compliance regulations and legal statutes and fine schedules set up by government.

• But Personal ethics requires personal decision-making, rooted in values.

Many think Ethics is just about what to NOT do: “Don’t do __!!”

But ethics is more than just what not to do

• Minimal: What we shouldn’t do • Don’t steal, don’t kill, don’t lie

• Better: What we should do (justice) • Be fair, Be honest, Fulfill duties, work hard

• Best: What we could do to make things excellent for all of us…

• Mutual of Omaha Project, Real Estate

The Point is: Realize the good you do in society!

• Businesses do have an effect on society and culture. Business is not just about making money.

Moral Psychology

WHY DO PEOPLE DO WRONG

THINGS?Milgram Experiment

Question: Why do Soccer mom’s sometimes drive like jerks?

Question: Why do people forge signatures and documents?

Why do people stretch or edit the truth, or exaggerate?

Moral Development: Why do people do unethical things?

• Why did the soccer mom drive like a jerk?

• Why did my student cheat on the exam?

• Why did people at Enron do unethical things?

• Why do subcontractors cut corners?

Some reasons people do wrong:

• Ignorant• In a hurry• Thoughtless• Didn’t plan ahead• Financial difficulties• Pressure from organization• Not clear communication from management• Lazy• Want a quick buck• They are a Bad evil wicked person

More Moral Psychology:

WHY DO PEOPLE DO THE RIGHT

THINGS?

Kohlberg’s theory of moral development

• Stage 1: Obedience and Punishment• Stage 2: For self-benefit• Stage 3: For sake of reputation (good boy)• Stage 4: Maintain Social order• Stage 5: Contractual-Legalistic orientation• Stage 6: Conscience/Principle Orientation

Moral Principles for Living and Working

• Banker Friend: “look in the mirror rule”

• Showgirl from Las Vegas: Grandma rule

• Golden Rule: do unto others…

• Silver Rule: do no harm…

• What rules do you use?....

Business Ethics Issues

• Fraud

• Abusive Behavior/Harassment

• Conflicts of interest

• Defective products

• Bribery

• Theft (patents, copyrights, etc)

Guiding Questions

• Questions to help decide if the situation or decision has ethical dimensions

– Is it legal but unethical?– Is it necessary?– Does it involve a core ethical principle such

as honesty, integrity, truthfulness, etc.?

Guiding Questions: Info

• Information gathering questions– Who are the stakeholders and what are their

rights?– Consider the source, reliability, and accuracy

of all relevant information.– Who should be involved in this decision?– Do I have enough information to make a

sound ethical decision? If not, how do I get it?

Questions to help identify and evaluate alternatives

– Am I rationalizing to justify what I want to do?– Am I using anyone for my own personal gain? (Who

will be injured and how)– Are there conflicting loyalties to stakeholders?– What would result in the long run if everyone did this?

Guiding Questions: Conclusion

• Questions that help in reaching a decision– Could I defend my position before the Board of

Directors, the CEO, or the media?– What would ______________________ do? (Fill in

the name of the best role model you know.)– Will this seem to be the right decision a year from

now? Five years from mow?– Do I have the moral courage to take the more ethical

course of action? (Am I willing to pay the price for my convictions?)

Moral Muteness

• The fact that managers rarely talk about ethics directly. Managers talk instead about:

– a. organizational interests

– b. practicality

– c. economic good sense

In reality, many of their decisions are actually guided by

• a. morally defined standards codified in law

• b. professional conventions

• c. social mores

And they defend moral activities such as:

• a. service to customers

• b. effective cooperation among personnel

• c. use of resources for company’s benefit

Go it Alone:

• Managers struggle with ethical issues, but don’t talk to one another about it much:

• “Morality is a live topic for individual managers but it is close to a non-topic among groups of managers.”

Communication& Follow-Through are Essential

• While normative expectations are explicitly given through legal rulings, regulatory agencies decrees, professional codes, organizational policies and social mores, if these are not communicated well, and acted upon, the message will not get out.

What is communicated?Ethics Materials: Mission

ValuesCode of conduct/ethicsPoliciesDecision methodsYour culture

Ethics program: Who is the Ethics Officer? How to make contact?

Senior Management Commitment to Ethics:

Why organizational ethics matters?

Methods of Communication

Evaluate current ethics communication lines– Formal and informal– downward, upward, and two way

Clear, consistent, credible messages across communication lines

More about Methods of Communication

Hiring Announcements Website Email Brochures Meetings – Formal & Informal Orientation sessions Newsletters Manuals Code Handbooks w/certifications Badges and Wallet Cards Key Fobs

Causes of Moral Muteness:

• 1. Threat to Harmony: moral talk often requires some challenge and confrontation

Causes of Moral Muteness:

• 2. Threat to efficiency: • a. if done with ideological exhortations it

• i. does not facilitate problem solving

• ii. doesn’t usually clarify issues• iii. seems self-serving

Causes of Moral Muteness:

• Threat to Efficiency (cont’d):

• b. moral talk adds an extra burden to business decisions—seen as distraction

• c. Adds additional rules and regulations, may hinder quick decisions

Causes of Moral Muteness:

3. Threat to image of Power and Effectiveness

• a. moral ideals highlight imperfections in current practices

• b. managers don’t want to expose their own moral illiteracy

• c. lower managers are expected to solve their own problems

Consequences of Moral Muteness

• 1. Moral Amnesia: forget that ethics is part of business

• Ex: Milton Friedman acts as though business should be concerned only with profit, not social responsibility, yet he alludes to 8 important ethical issues: no fraud, no deceit, fair competition, respect law, respect contracts, recognize employee and investor rights, maximize consumer satisfaction and freedom

Consequences of Moral Muteness

• 2. Narrowed conception of morality: Discuss business only in terms of strategy and common sense, and avoid discussing the ethical reasons for the decision. Ethics is construed to be only for the severely immoral—rules to punish breakers.

Consequences of Moral Muteness

• 3. Moral Stress: managers who don’t discuss the ethical issues will have more stress that they internalize

Consequences of Moral Muteness

• 4. Neglect of Abuses: Many moral issues are simply not organizationally recognized and addressed. “Many moral abuses are ignored, many moral ideals are not pursued, and many moral dilemmas remain unresolved.”

Consequences of Moral Muteness

• 5. Decreased authority of moral standards: The less we talk about it, the less those standards will seem real.

Not Just Cheerleading

• Charismatic Leadership and forceful commands bring about short term change, but long term changes require shared values which provide a common vocabulary for identifying and resolving problems.

How to make Changes

• Must provide an opportunity for open discussion without any danger of retribution or corporate punishment.

Making Changes

• 2. Important to help all involved realize that they hold similar long-run objectives and value common principles

– Help make shared commitments seem basic/core

– Less likely to become contentious if unity is emphasized

– Legitimate dissent will be more cordial and controlled if ground-rules are set up first.

Making Change Happen

3. Role of Senior Managers:– Must demand that these ethical

conversations take place– Need to build these into fabric of

organizational life– Interventions require patience

Management Creates a Culture

Management is All About Ethics

• “Typically, unethical business practice involves the tacit, if not explicit, cooperation of others and reflects the values, attitudes, beliefs, language, and behavioral patterns that define an organization’s operating culture. Ethics, then, is as much an organizational as a personal issue. Managers who fail to provide proper leadership and to institute systems that facilitate ethical conduct share responsibility with those who conceive, execute, and knowingly benefit from corporate misdeeds.”

WHAT GREAT LEADERS DO MOST- the most commonly expressed demands

Gallup Organization

VISIONING

MENTORING

CHALLENGING EXPERIENCES

KNOWING SELF

MAKING SENSE OF EXPERIENCES

STABILIZING VALUES

BUILD A CONSTITUENCY

7DEMANDS

“The true test of character is how we behave when we don’t know what to do.”

John Holt

ValuesGallup Organization

Gallup ValuesCommunication

We have an obligation to communicate. Here, we take the time to talk with one another and to listen. We believe that information is meant to move and that information moves people.

Respect

We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment.

Integrity

We work with customers and prospects openly, honestly, and sincerely. When we say we will do something, we will do it. When we cannot or will not do something, then we won’t do it.

Excellence

We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.

Tone at the Top Gallup Organization

The challenge at the top is to lead in accordance with the true values

of the organization.

If your organization does not have an entrenched value system, don’t claim that you do. Just

writing it down doesn’t make it so.

Enforcement

• Reality: Codes and rules without enforcement and adherence are useless.

• Question: How do we ensure compliance with legal rules and corporate policies?

Types of EnforcementThe best policy is to prevent wrongdoing

1. Getting Compliance (preventative)• Training and Education (‘I didn’t know’)• Review: Audit for compliance and quality • Incentives: compensation and recognition • Model: Leadership talks, and walks the talk

2. Punishment (responsive)• Clear Sanctions in place• Ethics Committee (method in place)• Someone with oversight responsibility

Summary

• Avoid Moral Muteness through Communication

• Good leadership will help create a strong corporate culture of ethics/compliance

• Talking the talk and walking the walk both are essential

Final Thoughts

• Often, doing the right thing is clear, even if its not easy

• We tend to cut corners for short-term apparently inconsequential issues, but this can come back to haunt us

• Having Ethical Habits takes practice, and some thoughtfulness.