Managerial Ethics

Managerial EthicsManagerial EthicsEthics DefinedEthics Defined

Principles, values, and beliefs that define what is right Principles, values, and beliefs that define what is right and wrong decisions and behavior.and wrong decisions and behavior.

Many decisions that managers make require them to Many decisions that managers make require them to consider both the process and who’s affected by the consider both the process and who’s affected by the result.result.

Exhibit - Factors That Determine Ethical and Unethical Exhibit - Factors That Determine Ethical and Unethical Behavior Behavior

Factors That Affect Employee EthicsFactors That Affect Employee Ethics

• Moral DevelopmentMoral DevelopmentMeasure of independence from outside Measure of independence from outside

influences.influences.Levels of Individual Moral DevelopmentLevels of Individual Moral Development

–Preconventional levelPreconventional level–Conventional levelConventional level–Principled levelPrincipled level

Levels of Individual Moral DevelopmentLevels of Individual Moral Development

a)a) Preconventional levelPreconventional level A person’s choice between right and wrong is A person’s choice between right and wrong is

based on personal consequences from outside based on personal consequences from outside sources, such as physical punishment & rewards.sources, such as physical punishment & rewards.

b)b) Conventional levelConventional level Ethical decisions rely on maintaining standards Ethical decisions rely on maintaining standards

and living up to the expectations of others.and living up to the expectations of others.

c)c) Principled levelPrincipled level Individuals define moral values apart from the Individuals define moral values apart from the

authority of the groups to which they belong or authority of the groups to which they belong or society in general.society in general.

Exhibit Exhibit Stages of Moral DevelopmentStages of Moral Development

Stage of moral development interacts with:Stage of moral development interacts with:

• Individual characteristicsIndividual characteristics• The organization’s structural designThe organization’s structural design• The organization’s cultureThe organization’s culture• The intensity of the ethical issueThe intensity of the ethical issue

Factors That Affect Employee EthicsFactors That Affect Employee EthicsIndividual CharacteristicsIndividual Characteristics

ValuesValues Basic convictions about what is right or wrong. Basic convictions about what is right or wrong. Employees in the same organization often posses very Employees in the same organization often posses very

different values.different values.

PersonalityPersonality Ego strength - A personality measure of the strength of a Ego strength - A personality measure of the strength of a

person’s convictionsperson’s convictions People with high ego strength are likely to resist impulses to People with high ego strength are likely to resist impulses to

act unethically and instead follow their convictions.act unethically and instead follow their convictions. Individuals with high ego strength are more consistent in their Individuals with high ego strength are more consistent in their

judgments and actions than those with low ego strength.judgments and actions than those with low ego strength.

Factors That Affect Employee EthicsFactors That Affect Employee EthicsLocus of ControlLocus of Control

– A personality attribute that measures the degree to which people A personality attribute that measures the degree to which people believe they control their own life.believe they control their own life.

– Internal locus:Internal locus: believe they control their own destinies. believe they control their own destinies.

– They are more likely to take responsibility for consequences and They are more likely to take responsibility for consequences and rely on their own internal standard of right and wrong to guide their rely on their own internal standard of right and wrong to guide their behavior.behavior.

– External locus:External locus: the belief that what happens to you is due to luck the belief that what happens to you is due to luck or chance.or chance.

– They are less likely to take personal responsibility for the They are less likely to take personal responsibility for the consequences of their behavior and more likely to rely on the consequences of their behavior and more likely to rely on the external forces.external forces.

Factors That Affect Employee EthicsFactors That Affect Employee Ethics• Structural VariablesStructural Variables

Organizational characteristics and mechanisms that guide and Organizational characteristics and mechanisms that guide and influence individual ethics:influence individual ethics:

Those structure that minimize ambiguity and uncertainty with formal Those structure that minimize ambiguity and uncertainty with formal rules and regulations and those that continuously remind rules and regulations and those that continuously remind employees of what is ethical are more likely to encourage ethical employees of what is ethical are more likely to encourage ethical behavior.behavior. Organization’s goals: use to guide and motivate employees.Organization’s goals: use to guide and motivate employees. People who don’t reach set goals are more likely to engage in People who don’t reach set goals are more likely to engage in

unethical behavior.unethical behavior. Performance appraisal systems: outcomePerformance appraisal systems: outcome Reward allocation systemsReward allocation systems Behaviors (ethical) of managersBehaviors (ethical) of managers

Factors That Affect Employee EthicsFactors That Affect Employee Ethics• Organization’s CultureOrganization’s Culture

Organization’s culture consists of the shared organizational values

An organization’s values are reflected in the decisions and An organization’s values are reflected in the decisions and actions of its employeeactions of its employee

Values-Based ManagementValues-Based Management: many organizations use: many organizations use A form of management in which organization’s values guide A form of management in which organization’s values guide

employees in the way they do their job.employees in the way they do their job. The Purposes of Shared ValuesThe Purposes of Shared Values

Guiding managerial decisionsGuiding managerial decisions Shaping employee behaviorShaping employee behavior Building team spiritBuilding team spirit

Factors That Affect Employee EthicsFactors That Affect Employee Ethics

• A culture that is strong and support high ethical standards has a very powerful and positive influence on the decision to act ethically or unethically.

Factors That Affect Employee EthicsFactors That Affect Employee Ethics• Issue intensity

• How important an ethical issue is to an individual.• The greater the number of people harmed, the more

agreement that the action is wrong; the greater the likelihood that the action will cause harm, the more immediately that the consequences of the action will be felt, and closer the person feels to the victim and the more concentrated the effect of the action on the victim, the greater the issue intensity or importance.

• When an ethical issue is important, employees are more likely to behave ethically.

Exhibit -Exhibit - Determinants of Issue IntensityDeterminants of Issue Intensity

How Managers Can Improve Ethical How Managers Can Improve Ethical Behavior in An OrganizationBehavior in An Organization1.1. Hire individuals with high ethical standards.Hire individuals with high ethical standards.2.2. Establish codes of ethics and decision rules.Establish codes of ethics and decision rules.3.3. Lead by example.Lead by example.4.4. Set realistic job goals and include ethics in Set realistic job goals and include ethics in

performance appraisals.performance appraisals.5.5. Provide ethics training.Provide ethics training.6.6. Conduct independent social audits.Conduct independent social audits.7.7. Provide support for individuals facing ethical Provide support for individuals facing ethical

dilemmas.dilemmas.

Exhibit - Codes of EthicsExhibit - Codes of Ethics

Cluster 1. Be a Dependable Organizational Citizen1. Comply with safety, health, and security regulations.2. Demonstrate courtesy, respect, honesty, and fairness.3. Illegal drugs and alcohol at work are prohibited.4. Manage personal finances well.5. Exhibit good attendance and punctuality.6. Follow directives of supervisors.7. Do not use abusive language.8. Dress in business attire.9. Firearms at work are prohibited.

Cluster 2. Do Not Do Anything Unlawful or Improper That Will Harm the Organization1. Conduct business in compliance with all laws.2. Payments for unlawful purposes are prohibited.3. Bribes are prohibited.4. Avoid outside activities that impair duties.5. Maintain confidentiality of records.6. Comply with all antitrust and trade regulations.7. Comply with all accounting rules and controls.8. Do not use company property for personal benefit.9. Employees are personally accountable for company funds.10. Do not propagate false or misleading information.11. Make decisions without regard for personal gain.

Cluster 3. Be Good to Customers1. Convey true claims in product advertisements.2. Perform assigned duties to the best of your ability.3. Provide products and services of the highest quality.

Effective Use of a Code of EthicsEffective Use of a Code of Ethics• Develop a code of ethics as a guide in handling Develop a code of ethics as a guide in handling

ethical dilemmas in decision making.ethical dilemmas in decision making.

• Communicate the code regularly to all Communicate the code regularly to all employees.employees.

• Have all levels of management continually Have all levels of management continually reaffirm the importance of the ethics code and reaffirm the importance of the ethics code and the organization’s commitment to the code.the organization’s commitment to the code.

• Publicly reprimand and consistently discipline Publicly reprimand and consistently discipline those who break the code.those who break the code.

The Value of Ethics TrainingThe Value of Ethics Training• Can make a difference in ethical behaviors.Can make a difference in ethical behaviors.

• Increases employee awareness of ethical issues Increases employee awareness of ethical issues in business decisions.in business decisions.

• Clarifies and reinforces the organization’s Clarifies and reinforces the organization’s standards of conduct.standards of conduct.

• Helps employees become more confident that Helps employees become more confident that they will have the organization’s support when they will have the organization’s support when taking unpopular but ethically correct stances.taking unpopular but ethically correct stances.

Exhibit - Being an Ethical Leader

• Be a good role model by being ethical and honest.° Tell the truth always.° Don’t hide or manipulate information° Be willing to admit your failures.

• Share your personal values by regularly communicating them to employees.

• Stress the organization’s or team’s important shared values.

• Use the reward system to hold everyone accountable to the values.

Provide support for individuals facing ethical Provide support for individuals facing ethical dilemmas.dilemmas.• Employees who face ethical dilemmas need

protective mechanisms so they can do what is right without fear of reprimand.

• May designate ethical counselor for employees facing a ethical dilemma

• Advisors also might advocate the ethically right alternatives

• Some organizations may appoint ethics officers

Managing Ethical Lapses and Social Managing Ethical Lapses and Social IrresponsibilityIrresponsibility

• Provide ethical leadershipProvide ethical leadership• Protect employees who raise ethical issues Protect employees who raise ethical issues

(whistle-blowers)(whistle-blowers)

Awareness of Social IssuesAwareness of Social Issues• Social EntrepreneursSocial Entrepreneurs

Are individuals or organizations who seek out Are individuals or organizations who seek out opportunities to improve society by using practical, opportunities to improve society by using practical, innovative, and sustainable approaches.innovative, and sustainable approaches.

Want to make the world a better place and have a Want to make the world a better place and have a driving passion to make that happen. driving passion to make that happen.

Businesses Promoting Positive Businesses Promoting Positive Social ChangeSocial Change• Corporate PhilanthropyCorporate Philanthropy

CampaignsCampaigns

DonationsDonations

Funding own foundationsFunding own foundations

• Employee Volunteering EffortsEmployee Volunteering Efforts Team volunteeringTeam volunteering

Individual volunteering during work hoursIndividual volunteering during work hours