MANAGING BUSINESS ETHICS

Introduction

Referencing

Chapters 1 & 2

Trevino & Nelson, Managing Business Ethics. NY: Wiley, 1999.

What is Ethics ?

Ethics can be understood as sets of formal and informal standards of conduct that people use to guide their behavior.

These standards are based in part on principles derived from core values such as honesty, respect and trust.

Ethics Resource Center

Legal Liability and Ethics:

Due Diligence and Effective Compliance 1) Establish compliance standards reasonably capable of preventing

criminal misconduct.2) Assign specific high-level individuals to oversee compliance

standards.3) Take care to whom you delegate discretionary authority involving

sensitive responsibilities4) Communicate standards & procedures to all employees (emphasis

on formality: training & manuals)5) Detect non-compliance w/ written standards (monitoring, auditing,

systems); including retribution free reporting.6) Consistently enforce written standards through disciplinary

mechanism (including failure to detect).7) After detecting offense, act to respond & prevent repeat.

Ethics vs. Law• Law reflects society’s MINIMUM norms and

standards of business conduct.

• There is a great deal of OVERLAP between what’s legal & what’s ethical.

• Law-abiding behavior is generally believed to also be ethical.

• There are many particular situations not covered strictly by law that fall under the umbrella of “ethical dilemmas.”

ETHICS

LAW

“Ethical Dilemmas”

. . . . . . . . . . . . . . . . . . . . . . a textbook definition

Situations concerning right and wrong where values are in conflict.

Trevino & Nelson, Managing Business Ethics. NY: Wiley, 1999. P.4

An Ethical Dilemma . . . . . .

. . .arises in a situation when each alternative choice or behavior is undesirable because of potentially harmful ethical consequences. Right or wrong cannot be clearly identified. (Daft & Marcic, p.137)

The Management Challenge

"Many companies proclaim the creation or expansion of business ethics and compliance programs with great fanfare and the best of intentions. But often businesses are unable to maintain the credibility of their programs over the long run, with devastating consequences for employees, shareholders, and others.”

Jeffrey M. Kaplan, The Conference Board Program Director.

A Workplace Perspective

“What values should we live by? What are we here to do? Modern workplaces offer little help in finding answers to

these perplexing queries. As a result, too many of us drift along with little sense of direction and without a moral compass to guide us through the ethically slippery world of work.

This deepens our discouragement about work and, ultimately, about life. You probably know people who are situationally smart but spiritually bankrupt.

Lee G. Bolman & Terence E. Deal, Escape from Cluelessness: A Guide for the Organizationally Challenged. American Management Association, 2000.

Survey of Workplace Ethics

found that employee perceptions and key ethics outcomes are more positive when:

Organizations have ethics programs in place, Employees see ethical values like honesty,

respect and trust applied frequently at work, and

Organizational leaders and supervisors are seen as modeling ethical behavior.

2000 National Business Ethics Survey

About one in every three employees observe misconduct at work.

The five types of misconduct observed most frequently include:

1) Lying; 2) Withholding needed information; 3) Abusive or intimidating behavior toward

employees; 4) Mis-reporting actual time or hours worked; and 5) Discrimination.

TWO OPPOSING VIEWS

• Managers are professionals• They don’t own the

business• Employees are responsible

only to shareholders• Must operate in best

interests of shareholders• Interests = FINANCIAL

RETURN

• Corporations are chartered by states

• Corporations are not independent entities

• Responsibility to larger society that endorses their creation

• Company’s first priority = SURVIVAL

CLASSICAL/ECONOMICCLASSICAL/ECONOMIC SOCIO- ECONOMICSOCIO- ECONOMIC

Can Business Ethics Be Taught in College Programs?

• Felix Rohatyn - “No, not past the age of 10”

• Lester Thurow - “Not unless students have already learned ethics from families, clergy, previous school or employers”

Should Employees Know the Difference between Right & Wrong?

• “Bad Apples”Individuals of good

character should be able to choose well without special training.

• “Bad Barrels” Good character doesn’t prepare

individuals to deal with very special ethical problems unique to their particular occupation or organization.

Factors that Affect Ethical Behavior

EthicalDilemma

Stages of Moral

DevelopmentMODERATORS

Individual Characteristics

IssueIntensity

StructuralCharacteristics of Organization

OrganizationalCulture

Ethical/UnethicalBehavior

CON . . . Ethics

ViolatesProfits

MaximizationLack ofSkills

Dilutionof Purpose

Lack ofAccountability

Too Much Power

Cost

PRO . . . Ethics

Preventionover

Cures

BalanceResponsibility

& Power

Better Environment

Discourage Government Regulation

Possession of

Resources

Long-runProfits

PublicImage

EthicalObligations

PublicExpectations

StockholderInterests