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© 2015 Cengage Learning1. Chapter 8 Personal and Organizational Ethics © 2015 Cengage Learning2.

Dec 21, 2015

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Page 1: © 2015 Cengage Learning1. Chapter 8 Personal and Organizational Ethics © 2015 Cengage Learning2.

© 2015 Cengage Learning 1

Page 2: © 2015 Cengage Learning1. Chapter 8 Personal and Organizational Ethics © 2015 Cengage Learning2.

Chapter 8Chapter 8Personal and Personal and

Organizational Organizational EthicsEthics

© 2015 Cengage Learning 2

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Learning OutcomesLearning Outcomes1.1. Understand the different levels at which business ethics may be Understand the different levels at which business ethics may be

addressed.addressed.2.2. Differentiate between consequence-based and Differentiate between consequence-based and

duty-based principles of ethics.duty-based principles of ethics.3.3. Enumerate and discuss principles of personal ethical decision Enumerate and discuss principles of personal ethical decision

making and ethical tests for screening ethical decisions.making and ethical tests for screening ethical decisions.4.4. Identify the factors affecting an organization’s ethical culture and Identify the factors affecting an organization’s ethical culture and

provide examples.provide examples.5.5. Describe and explain actions, strategies, or “best practices” to Describe and explain actions, strategies, or “best practices” to

improve an organization’s ethical climate.improve an organization’s ethical climate.6.6. Identify and describe concepts from “behavior ethics” that affect Identify and describe concepts from “behavior ethics” that affect

ethical decision making and behavior in organizationsethical decision making and behavior in organizations. . © 2015 Cengage Learning 3

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Chapter OutlineChapter Outline• Ethics Issues Arise at Different LevelsEthics Issues Arise at Different Levels• Personal and Managerial EthicsPersonal and Managerial Ethics• Managing Organizational EthicsManaging Organizational Ethics• Best Practices for Improving an Organization’s Ethical Best Practices for Improving an Organization’s Ethical

Culture Culture • Behavior Ethics – Striving Towards a Deeper Behavior Ethics – Striving Towards a Deeper

UnderstandingUnderstanding• Moral Decisions, Moral Managers, and Moral Moral Decisions, Moral Managers, and Moral

OrganizationsOrganizations• SummarySummary

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Personal and Organizational Ethics

• Managers encounter day-to-day ethical challenges in such areas as:• conflicts of interest

• sexual harassment

• customer dealings

• pressure to compromise on personal standards, and more

• Many managers have no training in ethics or ethical decision making.

• Ethics is vital to business success.

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Ethics Issues Arise at Different Levels

Personal level - •Situations faced in our personal lives outside the context of our employment.Organizational level -•Workplace situations faced by managers and employees.Industry or profession level -•A manager or organization might experience business ethics issues at the industry or professional level.Societal and global levels -•Managers acting in concert through their companies and industries can bring about constructive changes.

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Personal and Managerial Ethics

Three major approaches to ethical decision making - 1.Conventional Approach -

• Discussed in chapter 72.Principles Approach -

1. Managers desire to make decisions based on a more solid foundation than is provided by the conventional approach to ethics.

2. A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course.

•Ethical Tests Approach -1. Discussed later in this chapter.

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Types of Ethical Principles

Teleological theories -•Focuses on consequences or results of an action.

Deontological theories -•Focuses on duties, without regard to consequences.

Aretaic theories -•Focuses on the virtue of an action.

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Principles Approach to Ethics

Major principles of ethics -•Utilitarianism•Kant’s Categorical Imperative•Principle of Rights•Principle of Justice•Ethical Due Process•Rawl’s Principle of Justice•Ethics of care•Virtue ethics•Servant leadership•The Golden Rule

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Ethical Tests Approach

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Managing Organizational Ethics

• Ethical decision-making is at the heart of business ethics.

• One must sharpen one’s decision-making skills to avoid amoral thinking, and achieve moral management.

• A manager must see the organization's ethical climate as part of its corporate culture.

• An ethical climate is shaped through actions taken, policies established, and examples set.

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Factors Affecting the Morality of Managers and Employees

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Society’s Moral ClimateBusiness’s Moral ClimateIndustry’s Moral Climate

IndividualOne’s Personal

Situation

IndividualOne’s Personal

Situation

SuperiorsSuperiors

PoliciesPolicies

PeersPeers

Organization’s Moral Climate

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Factors Affecting the Organization’s Moral Climate

1. Behavior of superiors – the number one influence on moral climate

2. Behavior of one’s peers – the second influence; people do pay attention to what their peers in the firm are doing

3. Industry or professional ethical practices – ranked in the upper half; these context factors are influential

4. Personal financial need – ranked last© 2015 Cengage Learning 13

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Improving the Organization’s Ethical Culture

• The emphasis is on creating an ethical organizational culture or climate, one in which ethical behavior, values and policies are displayed, promoted and rewarded.

• Compliance vs. Ethics Orientation- 1. Ethics thinking is principles based; compliance

thinking is rule-bound and legalistic. A compliance orientation can undermine ethical thinking.

2. Compliance can squeeze out ethics.3. Managers many not consider tougher issues that a

more ethics-focused approach might require.© 2015 Cengage Learning 14

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Best Practices for Improving an Organization’s Ethical Culture

• Three key elements that must exist if an ethical organizational culture is to be developed and sustained:

1. The continuous presence of ethical leadership reflected by the board of directors, senior executives and managers.

2. The existence of a set of core ethical values infused throughout the organization by way of policies, processes and practices; and

3. A formal ethics program which includes a code of ethics, ethics training and an ethics officer.

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Improving Ethical Culture

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Top Management Leadership(Moral Management) (1 of 2)

• This premise cannot be overstated:• The moral tone of an organization is set by The moral tone of an organization is set by

top management. top management. • In a poll of communication professionals,

more than half believed that top management is an organization’s conscience.

• Managers and employees look to their bosses at the highest levels for their cues as to what practices and policies are acceptable.

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Top Management Leadership(Moral Management) (2 of 2)

• Weak Ethical Leadership – led an employee to embezzle $20,000 over a 15 year period, explaining that she thought it was ok because her boss used firm employees for personal needs, took money from the firm’s petty cash box, raided the soft drink machine, and used company stamps. Her boss said it was all true, and that she should not be dealt with too harshly.

• Strong Ethical Leadership – When a batch of tubes in production failed a critical safety test, leaving in question the 10,000 already manufactured, the VP, without hesitation, said “scrap them.” That act set the tone for the corporation for years, because everyone present knew of situations in which faulty products had been shipped under pressure of time and budget.

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Two Pillars of Leadership

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TraitsTraits

Mor

al P

erso

nM

oral Manager

Ethical LeadershipEthical Leadership

BehaviorsBehaviors

DecisionMakingDecisionMaking

RoleModeling

RoleModeling

EthicsCommunication

EthicsCommunication

Effective Rewards and Discipline

Effective Rewards and Discipline

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Effective Communication of Ethical Messages

Requires - •Written and verbal communication

•Non-verbal communication

•Candor – forthright, sincere and honest

•Fidelity – be faithful to detail, accurate, avoid deception or exaggeration

•Confidentiality – exercise care in deciding what information to disclose to others. Trust can be shattered if confidences are breached.

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Ethics Programs and Ethics Officers

Ethics programs typically include:•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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Setting Realistic Objectives -

• Managers must be keenly sensitive to the possibility of unintentionally creating situations in which others may perceive a need or incentive to cut corners or do the wrong thing.

• Unrealistic expectations are the primary driver of employees perceiving excessive pressure to achieve goals.

• Example: A marketing manager set a sales goal of a 20% increase for the next year when a 10% increase was all that could be realistically and honestly expected, even with outstanding performance. A subordinate might believe he or she should go to any lengths to achieve the 20% goal.

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Ethical Decision-Making Processes

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Ethics Check -

Ethics Check - 1.Is it legal?

2.Is it balanced?

3.How will it make me feel about myself?

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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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Codes of Conduct -

• A way of establishing standards of behavior and communicating them to managers and employees.

• The single most important element of an ethics and compliance program.

• Virtually all major corporations have codes of conduct today.

• Many have worldwide codes or standards.

• Some codes of conduct are designed around stakeholders, others on conduct.

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Content of Codes of Conduct -

• Employment practices

• Employee, client, and vendor information

• Public information and communications

• Conflicts of interest

• Relationships with vendors

• Environmental issues

• Ethical management practices

• Political involvement

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Disciplining Violators of Ethics Standards -

• Management must discipline violators of accepted ethical norms and standards.

• One reason many question the sincerity of business with regard to codes of conduct is that many business are unwilling to discipline violators, implicitly approving their behavior.

• Before disciplining anyone, the firm needs to have communicated its ethics standards clearly and convincingly.

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Ethics Hotlines and Whistle Blowing -

• An effective ethical culture is contingent on employees having (with support of top management) a mechanism for reporting violations.

• 78% of companies have anonymous reporting systems (Hotlines).

• Among firms subject to Sarbanes-Oxley, 91% have such systems.

• Hotlines are the most common way to report corporate fraud.• Can be telephone, web, or email-based.

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Business Ethics Training -

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Goals of Training are to learn:

1. the fundamentals of business ethics2. to solve ethical dilemmas3. to identify causes of unethical behavior4. about common managerial ethical issues5. whistle-blowing criteria and risks6. to develop a code of ethics and execute

an internal ethical audit

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Ethics Audits and Risk Assessments -

Ethics Audits -•Intended to carefully review such ethics initiatives as ethics programs, codes of conduct, hotlines, and ethics training programs.

Sustainability Audit - •Helps to identify sustainability issues within an organization.

Fraud Risk Assessment -•Review processes that identify and monitor conditions that may pertain to the company’s exposure to compliance/misconduct risk and to review methods for dealing with concerns.

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Corporate Transparency

Corporate Transparency -•A quality, characteristic, or state in which activities, processes, practices, and decisions that take place in companies become open or visible to the outside world.•The degree to which an organization:

• Provides public access to information.• Accepts responsibility for its actions.• Makes decisions more openly.• Establishes incentives for leaders to uphold

standards.

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Board of Director Leadership and Oversight -

• Leadership and oversight of ethical initiatives by boards has not been a given.

The Sarbanes-Oxley Act• Companies are required to protect whistle-

blowers without fear of retaliation.

• It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit.

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Behavioral Ethics – Striving Towards a Deeper Understanding (1 of 3)

Behavioral Ethics helps us to understand many of the behavioral processes that are taking place:

• Bounded ethicality – occurs when managers and employees find that behaving ethically is difficult because of various organizational pressures.

• Conformity bias – the tendency people have to take their cues for ethical behavior from their peers, rather than exercising their own, independent judgment.

• Overconfidence bias –people may be more confident of their moral character than they have reason to be.

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Behavioral Ethics – Striving Towards a Deeper Understanding (2 of 3)

• Self-serving bias – people may process information in a way that supports their preexisting beliefs & self-interest.

• Framing – ethical judgments are affected by how an issue is posed; if posed as an “ethical” issue, they make more ethical decisions.

• Incrementalism –a predisposition toward the “slippery slope.”

• Role morality – a tendency to use different ethical standards for different roles in life.

• Moral equilibrium – a tendency for people to keep an ethical scoreboard in their heads, and use this information when making future decisions, balancing decisions, and avoiding a moral “surplus”.

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Behavioral Ethics – Striving Towards a Deeper Understanding (3 of 3)

• Ill-conceived goals – poorly set goals that encourage negative behaviors.

• Motivated blindness – overlooking the questionable actions of others when it is in one’s own best interest.

• The slippery slope – causes people not to notice others’ unethical behavior when it gradually occurs in small increments.

• Overcoming values – the act of letting questionable behaviors pass if the outcome is good. This can occur when managers put more emphasis on results rather than on HOW the results are achieved.

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Moral Decisions, Moral Managers, and Moral Organizations

• The goal of managers should be to create moral decisions, moral managers, and ultimately, moral organizations, while recognizing that what we frequently observe in business is the achievement of moral standing at only one of these levels.

• The ideal is to create a moral organization that is fully populated by moral managers, making moral decisions (and practices, policies, and behaviors), but this is seldom achieved.

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• Aretaic theories• Behavioral ethics• Bounded ethicality• Categorical imperative• Codes of conduct• Codes of ethics• Compensatory justice• Compliance

orientation• Conformity bias• Core ethical values• Corporate

transparency• Deontological theories • Distributive justice• Ethical due process• Ethical leadership

• Ethical tests• Ethic of reciprocity• Ethics audits• Ethics of care• Ethics officer• Ethics orientation• Ethics programs• Ethics screen• Formal ethics program• Framing• Fraud risk assessments• Golden Rule• Ill-conceived goals• Incrementalism• Indirect blindness• Legal rights

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Key Terms Key Terms (1 of 2)(1 of 2)

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• Legal rights• Moral equilibrium• Moral rights• Motivated blindness• Negative rights• Opacity• Organizational

Sentencing Guidelines• Overcoming values• Overconfidence bias• Positive rights• Principle of justice• Principle of rights• Principle of

utilitarianism• Procedural justice• Process fairness• Rights

• Role morality• Self-serving bias• Servant leadership• Slippery slope• “smell” test• Sustainability audit• Teleological theories• Transparency• Utilitarianism• Virtue ethics

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Key Terms Key Terms (2 of 2)(2 of 2)