1 cbeb3101 business ethics lecture 5 semester 1, 2011/2012 prepared by zulkufly ramly 6 - 1
TRANSCRIPT
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CBEB3101 Business Ethics Lecture 5
Semester 1, 2011/2012Prepared by Zulkufly Ramly
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Contents of Topic 5
• Corporate culture and ethical climate
• Importance of ethical climate
• Compliance-based culture
• Integrity-based culture
• Ethics programme• Ethical leadership• Moral person versus
moral manager 3
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Topic 5 Learning Outcomes
1. Explain the importance of corporate culture in shaping the decision making process within an organisation
2. Describe the consequences of unethical culture
3. Differentiate between a compliance-based culture and an integrity-based culture
4. Briefly explain the elements of ethics programme
5. Explain the role of corporate leadership in establishing ethical culture
6. Describe the two pillars of ethical leadership
7. Distinguish between ethical and unethical leaders
Shared values, ideas, beliefs, customs, traditional practices that help define
and guide normal behavior for everyone who works in a company
Corporate culture
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Hence, corporate culture must have a strong ethical focus
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Importance of corporate culture
Individuals can be hindered or helped in making the right, or
the wrong, decision by the expectations, values, and
structure of the organization in which they live and work
Decision-making within a firm will be influenced, limited, shaped and in some cases virtually
determined, by the corporate culture of the firm
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Ethical culture
Shared perception and understanding
among employees of what is and is not
acceptable behavior, norms, practices or procedures in an
organisation
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• Top management of Johnson & Johnson (J&J) believed that by putting customers first enabled the achievement of shareholders’ objectives
• In a product crisis in 1982 where 7 people died after taking Tylenol tablet
• Did not know how the bottles were contaminated by a deadly chemical BUT the CEO took a quick action to recall ALL bottles sold in Chicago for concern of consumers safety
• Investigation revealed J&J was not responsible for the contamination – an act of sabotage
• For years – J&J and its employees always strive to give priority to customers’ interest first
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Example of ethical culture
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Creates presumption that “anything goes”
Destroys long-term sustainability
Reinforces “every personfor him/herself”
Absence of ethical culture
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NASA’s bad safety culture and organizational structure were important contributing factors of the disaster
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Lessons to be learned: Culture, gone wrong, can
be devastating
Done right - central to survival
Effective cultures are all about ethical values
Culture is not just impacted by a few top executives but by everyone at an organization
Case example - Columbia Disaster in 2003
• Acceptance or legality as a standard of behavior
• Bottom-line mentality, expectations of loyalty and conformity
• Absence of ethical leadership• Objectives that overemphasize profits• Insensitivity toward how subordinates
perceive pressure to meet goals• Inadequate formal ethics policies
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Questionable Behaviors of Superiors or Peers
• To improve quality of ethical performance – need to change the culture - make ethics a part of everyday decision-making
• To do so means institutionalizing ethics or building ethics safeguards into everyday routines
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Building Ethics Safeguard
Seeks to avoid legal sanctions
Emphasizes threat of detection and punishment to promote lawful employee behavior
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Two Ethics Approaches
Combine concern for law with emphasis on employee responsibility for ethical conduct
Employees instructed to act with integrity and conduct business dealings honestly
Integrity-basedCompliance-based
Both approaches have been found to reduce unethical conduct, but in somewhat different ways
IntegrityUpright, reliable and
unaffected set of values
or being straightforward in personal conduct
and business dealings
as opposed to
being dishonest, opportunistic and
untrustworthy14
Narrow focus
• meeting legal and regulatory requirements;
• minimizing risks of litigation and indictment;and
• improving accountability mechanisms
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Integrity-basedCompliance-based
Broader & more expansive
• maintaining brand & reputation;
• recruiting and retaining desirable employees;
• creating a better working environment for employees; and
• doing the right thing in addition to doing things right
Differences in Goals
• Top management commitment and involvement
• Ethics code or policies
• Ethics training
• High-level ethics personnel
• Effective communication
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• Ethical auditing
• Ethics helpline and hotline
• Whistleblowing procedures and protection
• Disciplinary measures
• Inclusion of ethical conduct in the evaluation of employee performance
Key Elements for Ethics Programmes
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Code of Ethics
A written document that explicitly states what acceptable and
unacceptable behaviours are for all
employees
Receiving gifts
Giving gifts
Protecting proprietary information
Environmental issues
Respect for privacy
Discrimination
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Ethical codes: Frequently Addressed Topics
General conduct
Sexual harassment
Kickbacks
Avoidance of conflicts of interest
Employee theft
Proper use of assets
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An organization is only as ethical as
its leaders, and only as ethical as its leaders can encourage their followers to be
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• To cultivate values, expectations, beliefs and patterns of behavior that best and most effectively support ethical decision-making
• Leaders are charged with this duty in part because stakeholders are guided to a large extent by the “tone at the top”
• Leadership sets the tone through other mechanisms such as the dedication of resources
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Role of the Leader in Corporate Culture
• The top management team sets the right example by behaving ethically and emphasizing on ethical values
• Encouraged and instilled ethical values among the employees
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‘Right tone at the top’
Johnson & Johnson … The CEO had set the ‘right tone at the top’ that is …
Only when customers were happy then interest of shareholders would be served
To put customers’ interest and safety first in whatever they do
• If a leader is perceived to be shirking her or his duties, misusing corporate assets, misrepresenting the firm’s capabilities, or engaged in other inappropriate behavior,
• Stakeholders receive the message that this type of behavior is not only acceptable, but perhaps expected and certainly the way to get ahead in that organization
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Moral person
Behaviours
Do the right thing, concern for people, being open, personal morality
Decision making
Hold on to values, objective/fair, concern for society, follow ethical
decision rules
Traits
Integrity, honesty, trustworthiness, competence, respect
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Rewards and discipline
Communicating about ethics and values
Role modeling through visible action
Moral manager
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Unethical leader
Has the core ethical traits of behaviour and decision making of a moral person
Has the ability to use the ethical traits and transfer them to others
Is a weak moral person and manager
Has a tendency to reward his/her own self-interests
Encourage employees to support or engage in unethical activities
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Ethical leader
Articulate and embody the purpose and values of the organization
Focus on organizational success rather than on personal ego
Find the best people and develop them
Create a living conversation about ethics, values, and value for stakeholders
Create mechanisms of dissent 27
Ethical Leadership Characteristics
Take a charitable understanding of others’ values
Make tough calls while being imaginative
Know the limits of the values and ethical principles they live
Connect the basic value proposition to stakeholder support and societal legitimacy
Frame actions in ethical terms