© 2015 Cengage Learning Chapter Personal and Organizational Ethics © 2015 Cengage Learning Learning Outcomes Understand the different levels at which business ethics may be addressed Differentiate between consequence-based and duty-based principles of ethics Enumerate and discuss principles of personal ethical decision making and ethical tests for screening ethical decisions Identify the factors affecting an organization’s ethical culture and provide examples Describe and explain actions, strategies, or “best practices” to improve an organization’s ethical climate Identify and describe concepts from “behavior ethics” that affect ethical decision making and behavior in organizations © 2015 Cengage Learning Chapter Outline • Ethics Issues Arise at Different Levels • Personal and Managerial Ethics • Managing Organizational Ethics • Best Practices for Improving an Organization’s Ethical Culture • Behavior Ethics – Striving Towards a Deeper Understanding • Moral Decisions, Moral Managers, and Moral Organizations • Summary © 2015 Cengage Learning 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 © 2015 Cengage Learning 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 © 2015 Cengage Learning Personal and Managerial Ethics Three major approaches to ethical decision making 1.Conventional Approach • Discussed in chapter 1.Principles Approach Managers desire to make decisions based on a more solid foundation than is provided by the conventional approach to ethics A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course •Ethical Tests Approach Discussed later in this chapter © 2015 Cengage Learning 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 © 2015 Cengage Learning 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 © 2015 Cengage Learning Ethical Tests Approach © 2015 Cengage Learning 10 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 © 2015 Cengage Learning 26 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 © 2015 Cengage Learning 27 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 © 2015 Cengage Learning 28 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 © 2015 Cengage Learning 29 Business Ethics Training Goals of Training are to learn: the fundamentals of business ethics to solve ethical dilemmas to identify causes of unethical behavior about common managerial ethical issues whistle-blowing criteria and risks to develop a code of ethics and execute an internal ethical audit © 2015 Cengage Learning 30 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 © 2015 Cengage Learning 31 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 © 2015 Cengage Learning 32 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 whistleblowers 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 © 2015 Cengage Learning 33 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 © 2015 Cengage Learning 34 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 & selfinterest • 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” © 2015 Cengage Learning 35 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 © 2015 Cengage Learning 36 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 © 2015 Cengage Learning 37 © 2015 Cengage Learning 38 Key Terms (1 of 2) • • • • • • • • • • • • • • • 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 © 2015 Cengage Learning 39 Key Terms (2 of 2) • • • • • • • • • • • • • • • • 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 © 2015 Cengage Learning 40 [...]... Cengage Learning 29 Business Ethics Training Goals of Training are to learn: 1 2 3 4 5 6 the fundamentals of business ethics to solve ethical dilemmas to identify causes of unethical behavior about common managerial ethical issues whistle-blowing criteria and risks to develop a code of ethics and execute an internal ethical audit © 2015 Cengage Learning 30 Ethics Audits and Risk Assessments Ethics Audits... client, and vendor information • Public information and communications • Conflicts of interest • Relationships with vendors • Environmental issues • Ethical management practices • Political involvement © 2015 Cengage Learning 27 Disciplining Violators of Ethics Standards • Management must discipline violators of accepted ethical norms and standards • One reason many question the sincerity of business. .. 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 © 2015 Cengage Learning 28 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% ... 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 © 2015 Cengage... •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... 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 © 2015 Cengage Learning 20 Ethics Programs and Ethics Officers Ethics programs typically... Cengage Learning 25 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 © 2015 Cengage Learning... climate, one in which ethical behavior, values and policies are displayed, promoted and rewarded • Compliance vs Ethics Orientation1 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...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 © 2015 Cengage Learning... Learning 16 Top Management Leadership (Moral Management) (1 of 2) • This premise cannot be overstated: • The moral tone of an organization is set by 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 ... the organization by way of policies, processes and practices; and A formal ethics program which includes a code of ethics, ethics training and an ethics officer © 2015 Cengage Learning 15 Improving... © 2015 Cengage Learning 20 Ethics Programs and Ethics Officers Ethics programs typically include: •Written standards of conduct Ethics training •Mechanisms to seek ethics advice or information... criteria and risks to develop a code of ethics and execute an internal ethical audit © 2015 Cengage Learning 30 Ethics Audits and Risk Assessments Ethics Audits •Intended to carefully review such ethics