ETHICS

1
Conducting Business Ethically
2
ETHICS

• Essence of Ethics
• Morally Questionable Acts
• Dynamic Relationships that Affect Ethical
  Decision Making
• Factors Affecting Ethical Decisions
• Norms and Counter-norms
• Managing Ethics

3
Does it Pay to Be Ethical? (Business Ethics
article)
TEXACO - racial discrimination 176
M MERCURY FINANCE - overstating profit 2.2
B ADM - price fixing 100 M GENETECH -
tying personal loan to business
deal CEO loses job BANKERS TRUST
- deliberately misled or deceived customers
Damaged image W.R. GRACE - sexual
harassment CEO loses job BAUSCH
LOMB - manipulation of accounting data
earnings fell 54
4
Does It Pay to Be Ethical? (Business Ethics
Article)

• 1. Responsibility to address corporate issues
  (58 Execs)
• 2. Corp. leaders responsibility is to the
  greatest good (52 Execs 35 MBAs)
• 3. Switch brands (76 consumers)
• 4. Skepticism about cause related marketing
  (58 consumers 21 today)
• 5. Do not buy (75 consumers)

58 execs 52 execs 35 MBAs 76 consumers 58
consumers 21 today 75 consumers
5
Does It Pay to Be Ethical? (Business
EthicsArticle)

• 1. Social responsibility is important (26
  investors)
• 2. Company image (84 employees)
• 3. Innovative workplace practices associated with
  productivity
• 4. Employee ownership leads to productivity (60
  companies)
• 5. Business has too much power (71 )
• 6. Corporate role is more than to make a profit
  (95)

1. 26 investors 2. 84 employees 4. 60
companies 5. 71 6. 95
6
Profit at Any Cost

• - Corporate layoffs - theft
• - Wall Street sins - selling
  products that do not meet specs.
• - Pentagon fraud
• - age discrimination - retaliation against
  employees who exposed unsafe/illegal
  practices
• - price fixing
• - use of banned chemicals
• - power in the market place
• Who is responsible? Captain of the ship?
• Does profitability excuse questionable
  behavior?

7
Essence of Ethics

• Codes do not produce ethical behavior.
• Our ethics tend to flow from our core values.
• People have intrinsic worth.

8
Watchdogs and Lapdogs (article by Malkiel

• Conflicts of interest lead to ethical problems
• Individual behavior is strongly influenced by
  incentive
• Self-regulation and standard setting
  organizations fall short

9
Steps to an Ethics Statement (article by Kensichi)

• Get support by CEO for support of key
  stakeholders
• Get stakeholders participation
• Expand words/ phrases into expectations
• Establish feedback mechanism
• Assure implementation/ monitoring of results
• Reward employees who perform and deliver on values

10
Morally Questionable Acts

• Non-job failures
• Cheating on your expense accounts
• Stealing supplies
• Sandbagging
• Job failures
• Superficial performance appraisal
• Not confronting expense account
• Cheaters
• Falsely praising poor performers
• Denial of training opportunities
• Undermine management

11
Morally Questionable Acts

• Job distortions
• Bribery
• Manipulation of suppliers/buyers
• Differential pricing
• Falsifying information
• Job creation
• Bending policies for certain customers
• Bending policies for salespeople
• Caught violating rules
• Arranging for promotions

12
FACTORS AFFECTING ETHICAL DECISIONS
UNCERTAINTY OF INPUTS
POWER
CENTRALITY OF WORKFLOW
CONTROL OF ETHICAL CONTINGENCIES
BEHAVIOR
SUBSTITUTABILITY OF ACTIVITIES
COPING ROUTINIZATION
PREVENTIVE ROUTINIZATION
13
A General Framework of the Ethical
Decision-Making Process
CHARACTERISTICS OF THE DECISION MAKER
OUTCOMES
ETHICAL SITUATION
DECISION
SIGNIFICANT INFLUENCES
14
Individual Characteristics of the Decision Maker
that Influence the Ethical Decision-Making Process
CHARACTERISTICS OF THE DECISION MAKER
ETHICAL SITUATION
OUTCOMES
DECISION
SIGNIFICANT INFLUENCES
Achievement motivation Knowledge Need for
affiliation Experience Ego strength
Risk taking Locus of control
Machiavellianism
15
Outcomes that Result from the Ethical
Decision-Making Process
CHARACTERISTICS OF THE DECISION MAKER
ETHICAL SITUATION
OUTCOMES
DECISION
SIGNIFICANT INFLUENCES
Performance Feedback Rewards
Promotions Satisfaction Learning
16
Significant Influences on the Ethical
Decision-Making Process
CHARACTERISTICS OF THE DECISION MAKER
ETHICAL SITUATION
OUTCOMES
DECISION
SIGNIFICANT INFLUENCES
The organization Technology Work
Significant others customers, The law
peers, immediate supervisor, Economics top
managers, family, friends, Professionalism
other opinion leaders
17
Elements of the Ethical Situation
CHARACTERISTICS OF THE DECISION MAKER
ETHICAL SITUATION
OUTCOMES
DECISION
SIGNIFICANT INFLUENCES
Opportunity Ethical decision history
Moral intensity of the situation
18
Elements of the Ethical Decision-Making Process
Characteristics of Decision Makers
Ethical Situation
Outcomes
DECISION
Significant Influences
ELEMENTS OF THE DECISION
Information acquired Information processed
PERCEIVED ETHICAL PROBLEM
Ethical decision history Expectations Sent and
received roles Ethics norms (personal those of
others)
PERCEIVED ALTERNATIVES, PRODUCT, PRICE,
PROMOTION, DISTRIBUTION INFO
JUDGMENT
Information acquired Information processed
PERCEIVED CONSQUENCES
Probability of consequences Desirability of
consequences
19
Value Differences Lead to Conflict
ORGANIZATION A
ORGANIZATION B
20
Norms Counternorms

• NORMS
• LT relationships with customers
• Objectivity
• Openness
• Candor
• Honesty
• Flexibility/Adaptability
• Cost-effectiveness
• Taking responsibility
• Customer Service
• Develop younger salespeople
• Team effort
• Consensus
• Loyalty

• COUNTERNORMS
• Sandbagging
• Emotional Involvement
• Secrecy
• Stonewalling
• Lying
• Dogmatism
• Padding expenses
• Passing the buck
• Sales force
• Look out for Number 1
• Individual goals first
• Taking unfair credit
• Criticize the company

21
Differences Between the OLD and NEW Ethic

• The OLD Ethic Favors
• Work
• Savings
• Responsibility
• Competition
• Sex roles
• Sacrifice
• Equality - Inequality
• Wealth accumulation
• Absolution
• Risk assumption
• Efficiency/Productivity
• Thrift/Investment

• The NEW Ethic Favors
• Leisure
• Debt
• Rights
• Protection
• Unisexism
• Self-interest
• Equality
• Wealth redistribution
• Situationalism
• Risk aversion
• Quality of life
• Consumerism

22
Managing Ethics

• Diagnose the reward system
• Analyze rules and procedures
• Training and education
• Develop investigative structures

23
Moral Courage (article by Williams)

• Leaders exhibit moral courage by being willing to
  make personal sacrifices
• Leaders should not become to preoccupied with
  pleasing constituents
• Leaders focus on needs of others - they have a
  commitment to serve
• Business as usual may be evidence of a leadership
  failure

24
CEOS Set the Tone for How to Handle Questions of
Ethics (Hymowitz)

• Determination and a winning personality equal
  success
• Employees rarely complain
• Employees take their cues from management
• Top management actions are more important than
  codes of ethics
• Employees wrestle with the short-run vs. long-run

25
THE ESSENCE OF ETHICS I(Article by Williams)

• Codes of ethics do not necessarily lead to
  ethical behavior.
• The core values we profess are not necessarily
  those by which we live.
• There is a place for compassion in leadership.
• Bureaucracy can come in conflict with ethics.
• Managers who vent their frustration on
  subordinates (who can do little about it) are not
  acting ethically.

26
THE ESSENCE OF ETHICS II(Article by Williams)

• Study the ethics of organizations which have
  reputations for being ethical.
• Build ethics into organization policies and
  practices.
• Make sure quality and service and integrity
  permeate the entire organization.
• Develop high expectations of all members of your
  organization.

27
THE ESSENCE OF ETHICS II (Article by Williams)

• Create an organizational culture that
• encourages...
• open and honest communication
• continual learning
• personal development
• respect for people

28
Background Slides

• You will be Responsible for this Material!

29
Company Threats to Ethical Behavior

• A firm that
• routinely ignores or violates internal codes of
  ethics
• always looks for simple solutions to ethical
  problems and is satisfied with quick fixes
• unwilling to take an ethical stand when there is
  financial cost to the decision
• creates an internal environment that either
  encourages unethical behavior or discourages
  ethical behavior
• usually sends its ethical problems to the legal
  department
• looks at ethics solely as a public relations tool
  to enhance its image

30
Company Threats to Ethical Behavior

• A firm that
• treats its employees differently from its
  customers
• is unfair or arbitrary in its performance
  appraisal standards
• has no procedures or policies for handling
  ethical problems
• provides no mechanisms for internal
  whistle-blowing
• lacks clear lines of communication within the
  organization
• is sensitive only to the needs of shareholders
• encourages its employees to leave their personal
  ethical values at the door

31
FIVE WARNING SIGNS OF ETHICAL COLLAPSE (Jennings
article)

• surround yourself with subordinates who are
  young, inexperienced, enthralled with power and
  deep in debt
• send a clear message that you expect results at
  any cost
• be certain the CEO is tyrannical and prone to
  anger
• when an employees public statements bring
  criticism to the company, cut the employee loose
• when an ethical lapse is discovered, never admit
  anything. Conceal, spin and gloss.

32
Do College Honor Codes Make Moral Sense on
Todays Campus?(Brownfield)

• Information on College Students
• 70 have cheated on a test at least once
• 87 have cheated on some type of written work
• 49 have collaborated with others on an
  assignment
• 52 have copied from someone
• 87 business majors have cheated at least once
• Conclusion grade learning
  short-run long-run
• chaos standards
  negligence integrity
• laziness diligence

33
Do College Honor Codes Make Moral Sense on
Todays Campus?(Brownfield)

• Is an Honor Code a reasonable ideal for
• Todays students???
• Today, we have a
• Questionable moral climate,
• Lack of strong, value-based up-bringing, and
• Celebration of negative role models

34
World of Payola (article by Zuckerman)

• Can we arrive at consistency in global ethics
  standards?
• Companies are identified by their corruption
• Who will want to partner with such companies?

35
The Environment was Ripe for Abuse (article by
Byrne, et al)

• PR vs. Performance
• Real transformations require a change in core
  values, attitudes, relationships, leadership with
  experience for change
• Sound organizations provide freedom to act, but
  also have some controls
• A culture built around star players cannot
  foster teamwork

36
Chapter 5 - Conducting Business Ethically and
Responsible

• Companies must be committed to ethics
• Codes
• Ethics Programs
• Ethics Orientation
• Social Responsibility
• Not the same as ethics
• Related to ethics

• Company Responsibilities
• Customers
• Employees
• Investors
• Others

37
Chapter 5 - Conducting Business Ethically and
Responsible

• Can businesses that conduct themselves in an
  ethical way be profitable?
• How can ethical behavior be encouraged?
• What do short-term and long-term thinking have to
  do with ethics?

38
Background Slides

• You Will be Responsible for this Material on the
  TEST

39
Alternative Courses of Action Available in
Ethical Situations
ACTIONS ADVANTAGES DISADVANTAGES

• NOT THINK ABOUT IT
• GO ALONG GET ALONG
• PROTEST

Avoids the danger of getting into a zero-sum game
with colleagues Same as not think about
it Individual feels good about making effort
to stop unethical behavior
The risk of going in the wrong direction Same as
not to think about it Individuals
slowly conform maybe to the wrong
direction Organization disregards protest
punishes protester
40
Alternative Courses of Action Available in
Ethical Situations
ACTIONS ADVANTAGES
DISADVANTAGES
Makes clear statement that one person feels that
action is unethical Person feels good about self
for making effort to stop unethical
behavior Signals that organization will lose
good people if unethical behavior
continues Person who leaves may join a
competitor, feels better because he/she did not
cooperate with unethical behavior
Few organizations recognize individual rights to
object May hurt chances for rewards and
advancement Most people are replaceable and if
replacement cooperates with unethical behavior,
what is gained?

• CONSCIENTIOUSLY OBJECT
• LEAVE

41
Alternative Courses of Action Available in
Ethical Situations
ACTIONS ADVANTAGES DISADVANTAGES
- Feelings of cowardice -
Creation of atmosphere of mistrust
- What will
whistle-blower do if confronted by firm - tell
the truth or lie? - Organization may attack the
whistle-blower - It
is difficult to interact with those one is
criticizing - It may be difficult
to work with those who hold a grudge - Does not
permit dialogue between upperlower managers
- Might prevent
injured consumers or clients from receiving
remedies

• SECRETLY BLOW THE WHISTLE
• PUBLICLY BLOW THE WHISTLE
• SECRETLY THREATEN TO BLOW THE WHISTLE

Can be very effective If whistle-blower remains
secret, retaliation cannot occur Can be
effective Whistle-blower may be treated as a
hero by many Can be very effective When it
works, organization is not hurt by bad publicity
42
Alternative Courses of Action Available in
Ethical Situations
ACTIONS ADVANTAGES
DISADVANTAGES

• SABOTAGE
• NEGOTIATE

Can be effective Identity of saboteur might be
protected Individual action may lead to
small-group consensus that will be more effective
than individual action Win-win solutions are
possible
Sabotage is not dialogue Retaliation might occur
against the saboteur or against others Innocent
people may be fired Does not work well in
situations that are zero-sum, lose-win, in
nature Individual who perceives ethical problem
may not know how to negotiate, my lose cool
43
SELECTED PRINCIPLES OF ETHICAL CONDUCT

• KANTS CATEGORICAL IMPERATIVE Act in a way that
  you believe is right and just for any other
  person in a similar situation.
• CARRS CONVENTIONALIST ETHIC Bluff and take
  advantage of all legal opportunities and
  widespread practices and customs
• THE DISCLOSURE RULE Ask how it would feel to
  see the thinking and details of the decision
  disclosed to a wide audience
• THE GOLDEN RULE Look at the problem from the
  position of another party affected by the
  decision and try to determine what response the
  other person would expect as the most virtuous

44
SELECTED PRINCIPLES OF ETHICAL CONDUCT

• THE HEDONISTIC ETHIC Do whatever you find to be
  in your own self-interest
• MOORES INTUITION ETHIC Go with your gut
  feeling or what you understand to be right in a
  given situation
• SMITHS MARKET ETHIC Take selfish actions and
  be motivated by personal gains in business
  dealings
• MACHIAVELLIS MEANS-END ETHIC Ask whether some
  overall good justifies any moral transgression
• NIETZSCHE/MARX MIGHT-EQUALS-RIGHT ETHIC Seize
  what advantage you are strong enough to use
  without respect to ordinary social conventions
  and laws

45
SELECTED PRINCIPLES OF ETHICAL CONDUCT

• THE ORGANIZATION ETHIC Ask whether actions are
  consistent with organizational goals and do what
  is good for the organization
• GARRETTS PRINCIPLE OF PROPORTIONALITY Do
  whatever you will if there is a proportional
  reason for doing so
• THE PROTESTANT ETHIC Do only that which can be
  explained before a committee of your peers
• THE REVELATION ETHIC Pray, mediate, or
  otherwise commune with a superior force or being
• BENTHAM / MILLS UTILITARIAN ETHIC Determine
  whether the harm in an action is outweighed by
  the good

46
A Taxonomy of Moral Types
MORAL TYPES DESCRIPTORS

• Hedontist
• Profit- maximizer
• Socialite

• 1. Make physical pleasures the supreme goal in
  their lives.
• KEY QUESTION Which course of action will yield
  the greatest pleasure?
• 2. Goal of making as much money as possible
• KEY QUESTION which course of action will make
  the most money?
• All their feelings and associations can be melted
  down to dollars
• 3. A social butterfly, a party animal
• KEY QUESTION Which course of action will help
  me best get along with the group?
• If you want to know what this person thinks, find
  out who spoke to him or her most recently

47
A Taxonomy of Moral Types
MORAL TYPES DESCRIPTORS

• Politician
• Self-actualizer
• Craftsman

• 4. Life centers around power and glory.
• KEY QUESTION Which course of action will
  increase my power and glory?
• These people have enormous egos, boundless
  ambitions, and undertake reckless actions.
• 5. Spiritual values predominate
• KEY QUESTION which course of action will help
  me become a better person?
• These people have new insights, reform old ways,
  initiate new ways of thinking, strike out on new
  paths
• 6. A technician
• POSITIVES Creative, knowledgeable, independent,
  self-reliant, hardworking
• NEGATIVES Sadistic, forceful, manipulative,
  non-trustworthy

48
A Taxonomy of Moral Types
MORAL TYPES DESCRIPTORS

• Company person
• Gamesman

• 7. Main goal in life to belong to an organization
  
• POSITIVES Service oriented, loyal, responsible,
  humble, sensitive to the needs of others,
  dependable, pleasant, trustworthy
• NEGATIVES Fear, worry, dependency, lacking
  vision, risk aversive, low drive, indecisive,
  change resistant
• 8. Dominant goal in life to gain prestige, glory,
  fame
• POSITIVES Inventive, flexible, change oriented,
  competitive, team player, independent, risk
  taker, impartial, high energy, idealistic
• NEGATIVES Lack of conviction, rebellious,
  manipulative, lack of intimacy, lonely

49
Models of Personal and Organizational Moral
Development

PERSONAL MORAL ORGANIZATIONAL
MORAL DEVELOPMENT
DEVELOPMENT

• PERSONAL MORAL DEVELOPMENT
• 1. Physical consequences determine moral
  behavior. Avoidance of punishment and deference
  to power are typical of this stage
• 2. Individual pleasure needs are the primary
  concern and dictate attitudes toward behavior

• ORGANIZATIONAL MORAL DEVELOPMENT
• 1. Social Darwinism - Fear of extinction and the
  urgency of financial survival dictate moral
  conduct. The direct use of force is the
  acceptable norm.
• 2. Machiavellianism - Organizational gain guides
  actions. Successfully attaining goals justifies
  the use of any effective means, including
  individual manipulation

50
Models of Personal and Organizational Moral
Development
PERSONAL MORAL ORGANIZATIONAL
MORAL DEVELOPMENT
DEVELOPMENT

• PERSONAL MORAL DEVELOPMENT
• 3. The approval of others determines behavior.
  The good person is one who satisfies family,
  friends, associates.
• 4. Compliance with authority, upholding of the
  social order, and doing ones duty are primary
  concerns

• ORGANIZATIONAL MORAL DEVELOPMENT
• 3. Cultural conformity - A tradition of standard
  operating procedures and caring groups. Peer
  professional pressure to adhere to social norms
  dictates what is the right and wrong behavior
• Allegiance to authority-
• Directions from legal authority
• determine moral standards.
• Right and wrong are based on
• the decisions of those with
• legitimate hierarchical power

51
Models of Personal and Organizational Moral
Development
PERSONAL MORAL ORGANIZATIONAL
MORAL DEVELOPMENT
DEVELOPMENT

• PERSONAL MORAL DEVELOPMENT
• 5. Tolerance for rational dissent and acceptance
  of majority rule become primary ethical concerns
• 6. What is right and good is a matter of
  individual conscience and responsibly chosen
  commitment. Morality is based on principled
  personal convictions

• ORGANIZATIONAL MORAL DEVELOPMENT
• 5. Democratic participation - Participation in
  decision-making reliance on majority rule become
  organizational moral standards. Participative
  management becomes institutionalized
• Organizational integrity-
• Justice and individual rights
• are the moral ideals. Balanced judgment
  between competing interests shapes organizational
  character which, in turn, determines the validity
  of the behavior