1 personal and organizational ethics professor craig diamond ba 385 october 21, 2009 chapter 8
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Personal and Organizational Ethics
Professor Craig Diamond
BA 385
October 21, 2009
Chapter 8
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Outline of Topics
Introduction
Personal and Managerial Ethics• Principles approach• Ethical Tests approach
Improving Organizational Ethics
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Introduction to Chapter 8
Key question this chapter addresses: “How do we make judgments about ethical dilemmas and come to justifiable decisions”?
Focus on the day-to-day ethical issues that managers face
Many managers have no training in business ethics or ethical decision-making
Ethics is vital to business success
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Ethics Resource Center – 2003 Survey
Behaviors observed by employees:• Abusive or intimidating behavior toward employees (23%)
• Misreporting actual time or hours worked (20%)
• Lying to employees, customers, vendors or the public (19%)
• Withholding needed information from employees, customers, vendors or the public (18%)
• Discriminating on the basis of race, color, gender, age, or similar categories (13%)
• Stealing, theft or related fraud (12%)
• Sexual harassment (11%)
• Falsifying financial records and reports (5%)
• Giving or accepting bribes, kickbacks, or inappropriate gifts (4%)
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Levels at Which Ethical Issues May Be Addressed
PersonalLevel
Situations faced in our personal lives outside the work context
Organizational Level
Workplace situations faced as managers and employees
Focus of this chapter
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Levels at Which Ethical Issues May Be Addressed
Societal andGlobal Levels
Societal or global situationsconfronted indirectly as a management team
IndustryLevel
Situations where a manager or organization might influence business ethics at the industry level
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Personal and Managerial Ethics
Conventional approachConventional approach
Principles approachPrinciples approach
Ethical tests approachEthical tests approach
ResolvingResolvingEthicalEthical
ConflictsConflicts
ResolvingResolvingEthicalEthical
ConflictsConflicts
Ethical decisions
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Ethical Dilemmas in Organizations
Typical dilemma: making a choice between self-interest and the interest of other stakeholders or groups.
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Types of Ethical Principles
TeleologicalTheories
TeleologicalTheories
Focus on the consequences or results of the actions they produce
Focus on the consequences or results of the actions they produce
DeontologicalTheories
DeontologicalTheories
Focus on duties Focus on duties
AretaicTheories
AretaicTheories
Focus on virtue (character trait)Focus on virtue (character trait)
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Principles Approach to Ethics
Major Principles of Ethics Applied to Business
Utilitarianism Categorical Imperative Rights Justice
Care Virtue ethics Servant leadership Golden Rule
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Principle of Utilitarianism
Utilitarianism focuses on acts that produce the greatest ratio of good to evil for everyone
Ignores actions that may be inherently wrong
May come into conflict withthe idea of rights & justice
Difficult to formulate satisfactoryrules for decision making
Strengths Weaknesses
Forces thinking about the general welfare and all stakeholders
Allows personal decisions to fit into the situation complexities
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Kant’s Categorical Imperative
Kant’s Categorical Imperative is a duty-based principle of ethics. A sense of duty arises from reason.
Formulations
1. Act only on rules that you would be willing to see everyone follow.
2. Act to treat humanity in every case as an end and never as a means (respect for people).
3. Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law.
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Principle of Rights
Focuses on protecting individual moral or legal rights
• Addresses weaknesses of utilitarianism
• Based on moral reasoning, not dependent on a legal system
• Morality from perspective of individuals and groups
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Rights vs. Utilitarianism
Equality vs. Efficiency Minimizing cost vs. safety precautions
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Examples of Legal or Moral Rights
Figure 8-1
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Principle of Justice
Fair treatment of people - “Fairness Principle”
Types of justice
Distributive – how to distribute benefits and burdens
Compensatory – compensation for past injustices
Procedural – ethical due process
Rawlsian
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1. Have employees been given input into the decision process?
2. Do employees believe the decisions were made and implemented in an appropriate manner?
3. Do managers provide explanations when asked? Do they treat others respectfully? Do they listen to comments being made?
Ethical Due Process
Fairness in Process and Decision-Making
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1. Each person should be treated equally and have and equal right to the most basic liberties
2. As much as possible, we should benefit the well-being of the socially and economically worse off
• Also known as “progressive” policy, e.g., “progressive taxation”
Rawls’s Principles of Justice
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Virtue ethics: focuses on individuals becoming imbued with virtues (focus on character over actions)
Aristotle and Plato
Ethic of Care and Virtue Ethics
Principle of caring: focuses on a person as a relational (cooperative) and less as an individual Feminist theory Stakeholder thinking
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Listening Empathy Healing Persuasion Awareness Foresight Conceptualization Commitment to the growth of
people Stewardship Building community
Servant Leadership
Leadership through serving others
Business Ethics and
Leadership
Bridges
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The Golden Rule
The Golden Rule focuses on the premise that you should do unto others as you would have them do unto you
The Golden Rule is…
1. accepted by most people
2. easy to understand
3. a win-win philosophy
4. a compass when you need direction
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Reconciling Ethical Conflicts
Concerns to be Addressed in Ethical ConflictsConcerns to be Addressed in Ethical Conflicts
Obligations
Ideals (values)
Effects (consequences)
Obligations
Ideals (values)
Effects (consequences)
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Guidelines for Conflicting Obligations, Ideals, and Effects
When two or more moral obligations conflict, choose the stronger one
When two or more ideals conflict, or when ideals conflict with obligations, honor the more important one
When effects are mixed, choose the action that produces the greater good or less harm
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Ethical Tests Approach
Test of One’s Best SelfTest of One’s Best Self
Test of Making Something PublicTest of Making Something Public
Test of VentilationTest of Ventilation
Test of Common SenseTest of Common Sense
Test of the Purified IdeaTest of the Purified Idea
Big Four (greed, speed, laziness, or haziness)Big Four (greed, speed, laziness, or haziness)
Gag TestGag Test
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Factors Affecting the Morality of Managers
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
IndividualOne’s Personal
Situation
IndividualOne’s Personal
Situation
SuperiorsSuperiors
PoliciesPolicies
PeersPeers
Organization’s Moral Climate
Figure 8-4
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Factors Affecting the Organization’s Moral Climate
1. Behavior of superiors (# 1 influence)
2. Behavior of one’s peers in the organization
3. Ethical practices of one’s industry or profession
4. Society’s moral climate
5. Formal organizational policy (or lack of one)
6. Personal financial need
Figure 8-5
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Pressures Exerted on Employees by Superiors
Top management: 50 percent agreed
Middle management: 65 percent agreed
Lower management: 85 percent agreed
“Managers feel under pressure to compromise personal standards to achieve company goals.”
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Pressure on Employees
One study found:• 60% of workers felt a “substantial” amount of pressure on
the job. 27% felt a “great deal” of pressure.
• 48% of workers reported that, due to pressure, they had engaged in one or more unethical and/or illegal actions during the past year (most frequent: cutting corners in quality control).
• Reasons for pressure:• 52% balancing work and family• 51% poor internal communication• 51% workload• 51% poor leadership
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Improving the Ethical Climate
Top Management
Moral Leadership
Top Management
Moral Leadership
Ethics Programsand Officers
Ethics Programsand Officers
RealisticObjectives
RealisticObjectives
Ethical Decision-Making Processes
Ethical Decision-Making Processes
Codes ofConduct
Codes ofConduct
Figure 8-7
EffectiveCommunication
EffectiveCommunication
Ethics TrainingEthics Training
CorporateTransparency
CorporateTransparency
Whistle-BlowingMechanisms
Whistle-BlowingMechanisms
Ethics Audits andRisk Assessments
Ethics Audits andRisk Assessments
Board of Directors’Oversight
Board of Directors’Oversight
Discipline ofViolators
Discipline ofViolators
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Two Pillars of Leadership
TraitsTraits
Ethical Leadership
BehaviorsBehaviors
DecisionMaking
DecisionMaking
RoleModeling
RoleModeling
EthicsCommunication
EthicsCommunication
Effective Rewards and Discipline
Effective Rewards and Discipline
Moral Person Moral Manager
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Effective Communication
Candor – honest, sincere, fair, free from prejudice and malice
Fidelity – detailed, accurate, no deception or exaggeration
Confidentiality – deciding when not to share information
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Ethics Programs
Written standards of conduct
Ethics training
Mechanisms to seek ethics advice or information
Methods for reporting misconduct anonymously
Disciplinary measures for employees who violate ethical standards
Inclusion of ethical conduct in the evaluation of employee performance
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Ethics Officers
Title of employee who managed the Ethics Program
Became more common following publication of the 1991 Sentencing Commission Guidelines. Then even more common after Sarbanes-Oxley in 2002.
2006: 62% of Fortune 500 companies had Ethics Officers
High profile Ethics Officers (on executive team)
• Examples: AIG, Bear Stearns
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Ethical Decision-Making Process
Figure 8-9
Industry and company standards also part of ethics screening
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Ethics Check
1. Is it legal?
2. Is it balanced (does it treat stakeholders fairly)?
3. How will it make me feel about myself?
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Texas Instruments Ethics Quick Test
1. Is the action legal?
2. Does it comply with our values?
3. If you do it, will you feel bad?
4. How will it look in the newspaper?
5. If you know it’s wrong, don’t do it.
6. If you’re not sure, ask.
7. Keep asking until you get an answer.
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Sears’ Guidelines
1. Is it legal?
2. Is it within Sears’ shared beliefs and policies?
3. Is it right / fair / appropriate?
4. Would I want everyone to know about this?
5. How will I feel about myself?
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Legal Compliance vs. Ethics
Until recently, legal compliance received much more focus than ethics. That is beginning to change.
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Codes of Ethics
95% of major corporations have them
Level of effectiveness depends on: Corporate culture Code enforcement Discipline for violation, reward for compliance Many other factors
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Hotlines: anonymous reporting of ethics problems• 78% of large companies have them• Most frequent way that ethical problems are reported• Can be as effective as ethics audits• One cross-industry study:
• 65% of reports warranted further investigation• 46% resulted in action being taken
Hotlines
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Ethics Training
About 77% of publically traded companies offer ethics training to employees
Effectiveness depends on:
• Culture
• Length and quality of training
• Many other factors
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Corporate Transparency
CorporateTransparency
Company activities, processes, practices, and decisions become open or visible to the outside world.
Leads to accountability and
trust of stakeholders
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The 2002 Sarbanes-Oxley Act
Companies are required to 1) provide avenues for employees to report ethical problems and 2) protect whistle-blowers without fear of retaliation
It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent its use in a federal government lawsuit
Board of Director Leadership and Oversight
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From Moral Decisions to Moral Organizations
Moral DecisionsMoral Decisions
Moral ManagersMoral Managers
Moral OrganizationsMoral Organizations
Figure 8-10
Maximize these
Maximize these
Ultimate goal
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Aretaic theories Categorical imperative Codes of conduct Codes of ethics Compensatory justice Corporate transparency Deontological theories Distributive justice Ethic of care Ethical due process Ethical tests Ethics audits Ethics officer Ethics programs Golden Rule Legal rights
Key Terms
Moral rights Negative right Opacity Positive right Principle of justice Principle of rights Principle of utilitarianism Procedural justice Rights Risk assessments Servant leadership Teleological theories Transparency Utilitarianism Virtue ethics