rooted in a high level of trust in its employ- ees, which is reinforced by the workers’
enthusiasm for the company and its goals.
The Chicago-based company organizes weekend events. Great Urban Races, War- rior Dashes, and Beach Dashes have par- ticipants completing scavenger hunts and racing around obstacle courses. For the less athletic, the company puts together Red Frog Bar Crawls, the Firefly Music Festival, and Farm to Fork chef-prepared dinners featuring locally grown produce served on a farm.
At headquarters, the company has about 80 full-time employees, but hundreds of people are needed to work on a race event. So for each event, Red Frog partners with local non- profits. For every 25 volunteers from the organization, Red Frog donates $1,000 to the orga- nization. The company also donates a portion of the proceeds from each Great Urban Race to St. Jude Children’s Hospital. The combination of charity and fun inspires employees as well as event participants, and it doesn’t seem to hurt business: Red Frog earned a profit on its first race and saw revenues skyrocket, with growth of more than 10,000 percent between 2008 and 2011.
Red Frog’s founder and co-CEO, Joe Reynolds, believes that because he hires enthusi- astic people who are devoted the company’s mission, he can trust them to manage their time responsibly. So Red Frog’s policy for time off allows unlimited vacation days. As long as employees meet their goals and arrange for someone to cover for them during an absence, they can take as many days as they want. Reynolds insists that in the company’s first five years, no one has abused the policy. 29
• As Red Frog grows, how should it reinforce its ethical climate to ensure ethical behavior?
Danger Signs Maintaining consistent ethical behavior by all employees is an ongoing challenge. What are some danger signs that an organization may be allowing or even encouraging unethical behavior? Many factors create a climate conducive to unethical behavior:
1. Excessive emphasis on short-term revenues over longer-term considerations 2. Failure to establish a written code of ethics
3. A desire for simple, quick-fix solutions to ethical problems
4. An unwillingness to take an ethical stand that may impose financial costs 5. Consideration of ethics solely as a legal issue or a public relations tool 6. Lack of clear procedures for handling ethical problems
7. Responding to the demands of shareholders at the expense of other constituencies 30
Regardless of your employer’s ethical climate, you are responsible for the decisions you make.
It’s been said that your reputation is your most precious asset. Here’s a suggestion:
Set a goal for yourself to be seen by others as both a moral person and as a moral manager, someone who influences others to behave ethically. When you are both
A Red Frog–organized event might include a Warrior Dash.
personally moral and a moral manager, you will truly be an ethical leader . 31 You can have strong personal character, but if you pay more attention to other things, and ethics is managed by benign neglect, you won’t have a reputation as an ethical leader.
Corporate Ethical Standards To create a culture that encourages ethical behavior, managers must be more than ethical people. They also should lead others to behave ethically. 32 At General Electric, chief executive Jeffrey Immelt demonstrates his concern for ethical leadership by beginning and ending each annual meeting with a statement of the company’s integrity principles, emphasizing that “GE’s business suc- cess is built on our reputation with all stakeholders for lawful and ethical behavior.” 33
IBM uses a guideline for business conduct that asks employees to determine whether, under the full glare of examination by associates, friends, and family, they would remain comfortable with their decisions. One suggestion is to imagine how you would feel if you saw your decision and its consequences on the front page of the newspaper. 34 This “light of day” or “sunshine” ethical framework can be powerful.
Such fear of exposure compels people more strongly in some cultures than in oth- ers. In some Asian countries, anxiety about losing face often makes executives resign immediately if they are caught in ethical transgressions or if their companies are embarrassed by revelations in the press. By contrast, in the United States, exposed executives might respond with indignation, intransigence, pleading the Fifth Amend- ment, stonewalling, and an everyone-else-does-it
self-defense or by not admitting wrongdoing and giving no sign that resignation ever crossed their minds. Partly because of legal tradition, the atti-
tude often is never explain, never apologize, don’t admit the mistake, and do not resign, even if the entire world knows exactly what happened. 35
Ethics Codes The Sarbanes-Oxley Act requires public companies periodically to disclose whether they have adopted a code of ethics for senior financial officers—and if not, why not. Often the statements are just for show, but when implemented well, they can change a company’s ethical climate for the better and truly encourage ethi- cal behavior. Executives say they pay most attention to their company’s code of ethics when they feel that stakeholders (customers, investors, lenders, and suppliers) try to influence them to do so, and their reasons for paying attention to the code are that doing so will help create a strong ethical culture and promote a positive image. 36
Ethics codes must be carefully written and tailored to individual companies’ philoso- phies. Table 5.4 reprints the introduction to Unisys Corporation’s code, which is based on four values that serve as the basis for key ethical principles. Most ethics codes address subjects such as employee conduct, community and environment, shareholders, custom- ers, suppliers and contractors, political activity, and technology. The nonprofit Ethics Resource Center assists companies interested in establishing a corporate code of ethics. 37 To make an ethics code effective, do the following: (1) involve those who have to live with it in writing the statement; (2) focus on real-life situations that employees can relate to; (3) keep it short and simple, so it is easy to understand and remember;
(4) write about values and shared beliefs that are important and that people can really believe in; and (5) set the tone at the top, having executives talk about and live up to the statement. 38 When reality differs from the statement—as when a motto says people are our most precious asset or a product is the finest in the world, but in fact people are treated poorly or product quality is weak—the statement becomes a joke to employees rather than a guiding light.
Ethics Programs Corporate ethics programs commonly include formal ethics codes that articulate the company’s expectations regarding ethics: ethics committees that develop policies, evaluate actions, and investigate violations; ethics communication systems that give employees a means of reporting problems or getting guidance; ethics
ethical leader One who is both a moral person and a moral manager influencing others to behave ethically.
Fear of exposure compels people more strongly in some cultures than in others.
officers or ombudspersons who investigate allegations and provide education; ethics training programs; and disciplinary processes for addressing unethical behavior. 39
Ethics programs can range from compliance-based to integrity-based. 40 Comp- liance-based ethics programs are designed by corporate counsel to prevent, detect, and punish legal violations. Program elements include establishing and communicat- ing legal standards and procedures, assigning high-level managers to oversee compli- ance, auditing and monitoring compliance, reporting criminal misconduct, punishing wrongdoers, and taking steps to prevent offenses in the future.
Such programs should reduce illegal behavior and help a company stay out of court.
But Richard Breeden, former chairman of the Securities and Exchange Commission, said, “It is not an adequate ethical standard to aspire to get through the day without being indicted.”
Integrity-based ethics programs go beyond the mere avoidance of illegality; they are concerned with the law but also with instilling in people a personal responsibility for ethical behavior. With such a program, companies and people govern themselves through a set of guiding principles that they embrace.
For example, the Americans with Disabilities Act (ADA) required companies to change the physical work environment so it will allow people with disabilities to func- tion on the job. Mere compliance would involve making the changes necessary to avoid legal problems. Integrity-based programs would go further by training people to understand and perhaps change attitudes toward people with disabilities and send- ing clear signals that people with disabilities also have valued abilities. This effort goes far beyond taking action to stay out of trouble with the law. 41
Ethical Decision Making
We’ve said it’s no t easy to make ethical choices. Such decisions are complex. For start- ers, you may face pressures that are difficult to resist. Furthermore, it’s not always clear that a problem has ethical dimensions; they don’t hold up signs that say “Hey, I’m an ethical issue, so think about me in moral terms!” 42
compliance-based ethics programs
Company mechanisms typically designed by corporate counsel to prevent, detect, and punish legal violations.
integrity-based ethics programs
Company mechanisms designed to instill in people a personal responsibility for ethical behavior.
LO 3
As a Unisys employee or director, you are expected to always act in accordance with our Code of Ethics and Business Conduct. Four key principles form the basis for our Code:
Integrity We are honest in all our dealings and stand for what is right.
Respect We show respect for one another by treating everyone with dignity and fairness.
Accountability We are accountable for our actions and honor our commitments.
Responsibility We conduct our business as responsible citizens in accordance with applicable laws and regulations in each country where we operate.
While the Code does not cover every situation you may encounter, it provides general guidance. If you have questions about how to handle a work situation, refer to the Code and, most importantly, seek guidance from the Corporate Ethics Officer or the Office of the General Counsel.
As a Unisys employee you have the obligation and responsibility to report any suspected potential or actual violation of the Code to your manager, the Corporate Ethics Office or the Office of General Counsel. As a manager, if you receive such a report, you must immediately notify the Corporate Ethics Office or the Office of the General Counsel. The Corporate Ethics Office, working with the Office of the General Counsel, has the responsibility to review and investigate every ethics matter.
If in doubt, contact the Corporate Ethics Office.
TABLE 5.4
Unisys Corporation’s Code of Ethics and Business Conduct: Introduction
SOURCE: Unisys Corporation, “Code of Ethics and Business Conduct,” effective December 7, 2011, http://www.app3.unisys.
com/investors/other/Code_of_Ethics.pdf . Reprinted with permission.
Making ethical decisions takes moral awareness (realizing the issue has ethical implications), moral judgment (knowing what actions are morally defensible), and moral character (the strength and persistence to act in accordance with your ethics despite the challenges). 43
The philosopher John Rawls created a thought experiment based on the “veil of ignorance.” 44 Imagine that you are making a decision about a policy that will benefit or disadvantage some groups more than others. For example, a policy might provide extra vacation time for all employees but eliminate flextime, which allows parents of young children to balance their work and family responsibilities. Or you’re a university president considering raising tuition or cutting financial sup- port for study abroad.
Now pretend that you belong to one of the affected groups, but you don’t know which one—for instance, those who can afford to study abroad or those who can’t, or a young parent or a young single person. You won’t find out until after the decision is made. How would you decide? Would you be willing to risk being in the disadvan- taged group? Would your decision be different if you were in a group other than your own? Rawls maintained that only a person ignorant of his own identity can make a truly ethical decision. A decision maker can apply the veil of ignorance to help mini- mize personal bias.
Thinking before deciding, and having an ethics-oriented conversation with oth- ers, can help you and others make more ethical decisions. 45 You can use the process illustrated in Figure 5.1 . Understand the various
moral standards (universalism, relativism, etc.), as described on pp. 158–159. Go through the problem- solving model from Chapter 3 and recognize the
impacts of your alternatives: Which people do they benefit and harm, which are able to exercise their rights, and whose rights are denied? You now know the full scope of the moral problem.
Excuses are often bogus. 46 “I was told to do it” implies a person has no thought and blindly obeys. “Everybody’s doing it” often really means that someone is doing it, but it’s rarely everybody; regardless, following convention doesn’t mean correctness.
“Might equals right” is just a rationalization. “It’s not my problem” is sometimes a wise perspective, if it’s a battle you can’t win, but sometimes it’s a cop-out. “I didn’t mean for that to happen, it just felt right at the time” can be prevented with more forethought and analysis.
You must also consider legal requirements to ensure full compliance, and the eco- nomic outcomes of your options, including costs and potential profits. 47 Some are
Bottom Line
“Costs” aren’t exactly synonymous with “ethics.” But by considering all costs to all parties, you can make high-quality ethical decisions that you can more convincingly sell to others who might otherwise balk.
What are some costs of treating employees unethically?
FIGURE 5.1
A Process for Ethical Decision Making
Recognize all moral impacts:
–Benefits to some.
–Harms to others.
–Rights exercised.
–Rights denied.
Understand all moral standards.
Define complete moral problem.
Determine the economic outcomes.
Consider the legal requirements.
Evaluate the ethical duties.
Propose convincing moral solution.
SOURCE: L. T. Hosmer, The Ethics of Management, 4th ed. McGraw-Hill/Irwin, 2003, p. 32. Fig. 5.1A . © 2003 The McGraw-Hill Companies. Reprinted with permission.
Excuses are often bogus.
obvious: fines and penalties. Others, such as corrective actions and lower morale, are less obvious. Ultimately, the effects on customers, employees, and government reac- tions can be huge. Being fully aware of the potential costs can help prevent people from straying into unethical terrain.
Courage
Behaving ethically requires not just moral awareness and moral judgment but also moral character, including the courage to take actions consistent with your ethi- cal decisions. Think about how hard it can be to do the right thing. 48 On the job, how hard would it be to walk away from lots of money just to stick to your ethics?
To tell colleagues or your boss that you believe they’ve crossed an ethical line? To disobey a boss’s order? To go over your boss’s head to someone in senior manage- ment with your suspicions about accounting practices? To go outside the company to alert others if someone is being hurt and management refuses to correct the problem?
Courage plays a role in the moral awareness involved in identifying an act as uneth- ical, the moral judgment to consider the repercussions fully, and the moral character to take the ethical action. Consider, for example, how difficult it is to deliver unpleas- ant news, even if you agree that honesty is important and is the way you would want to be treated. This was a hurdle for some Hilton Worldwide managers as they made staffing decisions for their call centers. Hilton, which operates call centers in five countries and contracts with call centers in the Philippines, reportedly sent employees from its Hemet, Cali- fornia, center to a new call center in Manila to train employees in handling reservation changes and other customer service activities.
Only afterward were the California employees told that the company would be clos- ing the Hemet facility, located southeast of Los Angeles, and laying off the workers there unless they chose to relocate to jobs in Texas or Florida. Perhaps the managers feared that telling employees they were training their replacements would have hurt performance; honesty takes courage when it is risky, and the risks of complete honesty are real. 49
Behaving ethically in an ethical climate is complicated enough, but even more courage is necessary when you decide that the only ethical course of action is
whistleblowing —telling others, inside or outside the organization, of wrongdoing.
The road for whistleblowers is rocky. When whistleblowers go public, they are often seen as acting against the company’s interests. Many, perhaps most, whistleblowers suffer consequences such as being ostracized, treated rudely, or given undesirable assignments.
For this reason, and in response to the revised sentencing guidelines under the Sarbanes-Oxley Act, organizations set up channels for employees to report ethics problems so the organization can respond without the matter becoming a scandal.
Ideally, the reporting method should keep the whistleblower’s identity secret, man- agement should investigate and respond quickly, and there should be no retaliation against whistleblowers who use proper channels. 50
From the manager’s perspective, of course, the goal is to lead employees to main- tain high ethical standards, which creates an environment in which whistleblowing is unnecessary. As you read “Management Connection: Progress Report,” consider how IBM promotes ethical conduct and how this might reinforce employees’ moral courage.
The road for whistleblowers is rocky.
167 One advantage IBM has in meeting its standards for trust
is that it is part of a relatively trusted industry. In the Edelman Trust Barometer, an annual survey of public attitudes toward a variety of institutions, people from around the world rated the technology industry as the industry they most often trust to do what is right—
mainly because they see tech companies as able to ben- efit society. People are, however, concerned about data security and privacy.
IBM is addressing these issues. It has a set of poli- cies aimed at building trust, including a policy for busi- ness conduct and ethics and a policy for protecting data privacy. The ethics policy states, “It is IBM’s policy to conduct itself ethically and lawfully in all matters and to maintain IBM’s high standards of business integrity.” It puts employees on notice that there are consequences for unethical conduct. IBM’s policies call for fairness, equity, a commitment to quality, and compliance with laws, including employment and anti-corruption laws. Its data privacy laws call for employees to collect only rel- evant personal information, keep it as accurate as pos- sible, and take measures to keep it secure, among other requirements.
Compliance with ethical standards is most likely when managers and employees at all levels are committed to the standards. Thus, it should help IBM that its strategy and culture changes under Sam Palmisano started with an
all-employee values jam. An outcome of that process was a statement of three values:
1. Dedication to every client’s success
2. Innovation that matters, for our company and the world
3. Trust and personal responsibility in all relationships These statements appear on the company’s website, where any employee or concerned citizen can be reminded of what IBM is striving to achieve.
Even with formal statements and consequences for behavior, maintaining ethical conduct is a challenge, espe- cially for a global company, because employees encounter differences in standards and practices in other countries.
Thus, IBM was charged by the Securities and Exchange Commission with bribing government officials in South Korea and China over more than 10 years. In its settle- ment, IBM must file monthly reports with the SEC to demonstrate its efforts to avoid future violations of the Foreign Corrupt Practices Act. Living up to its own code of ethics will require continued vigilance at IBM. 51
• Besides the measures described, how else can IBM promote ethical conduct by its employees?
• In a company operating where bribing government officials is expected, how can employees find the moral courage to forgo bribery at the risk of losing a big sale?
Management Connection