The New Challenges

The Challenge of International Competition The Challenge of New Technologies The Challenge of Increased Quality The Challenge of Employee Motivation and Commitment

The Challenge of Managing a Diverse Work Force

The Challenge of Ethical Behaviour

Five Basic Values for Managerial Roles

Integrity Sensitivity

Creative Thinking
Confidence Service Mindedness

What is Ethics?

Ethics is the study of virtue Dr. Jim Toner, AWC

Ethics is the critical study of standards for judging the rightness or wrongness of conduct Barbara Whitehead

Ethics is the name we give to our concern for good behavior Albert Schweitzer

What is Ethics
Ethics is NOT about the way things are It IS about the way things OUGHT to be

Ethics Defined

A study of the standards of conduct and moral behavior. A system or code of morals of a particular philosophy, religion, group, profession, etc. In other words, Ethics is about appropriate behavior, such as:
What

is good and bad; Right and wrong. Moral duty and obligation; Principles and values.

Ethics and the law

Ethics

GREY AREA

Law

Ethical People
An ethical person often chooses to do more than the law
requires, and less than the law allows there is a difference between what you have a right to do, and what is right to do.

Defining morality, ethics and ethical theory

Morality is concerned with the norms, values and beliefs embedded in social processes which define right and wrong for an individual or a community.
Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for any given situation.

These rules and principles are called ethical theories.

The relationship between morality, ethics and ethical theory

Ethics rationalizes morality

to produce ethical theory

that can be applied to any situation.

Morality

Ethics

Ethical theory

Potential solutions to ethical problems

Why is ethics important?

Power and influence in society
Potential to provide major contribution to society Potential to inflict harm

1.
2. 3.

4.
5. 6.

Increasing demands from stakeholders

Lack of ethics education or training Continued occurrence of ethical infractions

7.
8.

Evaluating different ways of managing business ethics

Interesting and rewarding

Why act Ethically? (contd.)

The reasons for an organisation to be ethical include: To prevent harm to the general public, To build trust with key stakeholder groups,

To protect themselves from abuse from unethical employees and competitors,

To protect their own reputations,

To protect their own employees, and

To create an environment in which workers can act in ways consistent with their values.

Types of misconduct employees observed among co-workers

Type of Misconduct of Co-Workers Abusive or intimidating behaviour towards employees Lying to employees, customers, vendors, or the public A situation that places employee interests over organizational interests Violations of safety regulations Misreporting of actual time worked Discrimination on the basis of race, colour, gender, age or similar categories Stealing or theft Sexual harassment Percentage of employees observing misconduct 21% 19% 18% 16% 16% 12%
Source: Ethics Resource Center (2005)

11% 9%

Overview

Locate the role of ethical theory

Provide critical overview of traditional ethical theories Explore contemporary ethical theories

What are normative ethical theories?

Ethical theories are the rules and principles that determine right and wrong for any given situation
Crane and Matten (2007)

Normative ethical theories are those that propose to prescribe the morally correct way of acting
As opposed to descriptive ethical theories which seek to describe how ethics decisions are actually made in business

The role of ethical theory

Two extreme positions (De George 1999)

Ethical absolutism claims there are eternal, universally applicable moral principles

Right and wrong are objective qualities that can be rationally determined

Typically traditional ethical theories

Ethical relativism claims morality is context dependent and subjective

No universal right and wrongs that can be rationally determined & depends on person making the decision and culture in which they are located Typically contemporary ethical theories

Traditional ethical theories

Generally offer a certain rule or principle which one can apply to any given situation These theories generally can be differentiated into two groups

Motivation/ Principles

Action

Outcomes

Non-consequentialist Ethics Consequentialist Ethics

Source: Crane and Matten (2007)

Egoism

Theory of egoism - an action is morally right if the decisionmaker freely decides in order to pursue either their (shortterm) desires or their (long-term) interests.

Adam Smith (1793) pursuit of individual interest morally acceptable through invisible hand of market as creates benefit for all

Relies on free competition & good information Enlightened egoism However, markets do not function perfectly

Major Philosophical Ethical Principles

Teleological Approaches:

Utilitarian Theory (J. Bentham and J.S. Mill) Greatest benefits for the Largest Number Utilitarianism raises important considerations that must be accounted for in any decision matrix, such as:

Any decision must be impartial, treating each person equally, not no more than equally
Ideally, no decision is acceptable that increases harms of any sort, even to a small number of people An ideal decision is one that maximizes the pleasures, preferences, desires, interest or well being of the greatest number

Major Philosophical Ethical Principles (Contd.)

Teleological Approaches (Contd.)

Distributive Justice (J Rawls) Equality of Burden and Benefit It requires treating similar cases similarly and treating persons as equals except when they have relevant differences. Justice is ordinarily synonymous with fairness, requirement of consistency, equity, and impartiality Retributive Justice Compensatory Justice

Act- and Rule-Utilitarianism

Act utilitarianism looks to single actions and bases the moral judgement on the amount of pleasure and the amount of pain this single action causes.

Rule utilitarianism looks at classes of action and ask whether the underlying principles of an action produce more pleasure than pain for society in the long run.

Problems with Utilitarianism

Subjectivity

Led to refinement of theory

Act

utilitarianism utilitarianism

Rule

Problems with quantification

Distribution of utility

Major Philosophical Ethical Principles (Contd.)

Deontological Approach:

Universalist Theory (Emamuel Kant) Similar Decision by Everyone in Similar Circumstances Rule Based Morality

The best moral choices are those that you want

others to do, even when you cannot make yourself an exception, and that, respect others as persons

Major Philosophical Ethical Principles (Contd.)

Deontological Approach (Contd.)

Universalist Theory (Contd.) Rule Based Morality (Contd.) The following kinds of questions can be asked when deciding what action to take: Does the action set positive or negative precedents? Is it an actions that is acceptable to other reasonable persons? Is it applicable to other similar situations? Does it respect or at least does not denigrate human dignity?

Major Philosophical Ethical Principles (Contd.)

Deontological Approaches (Contd.)

Universalist Theory (Contd.) Some commonly held moral rules include: Non Malevolence (avoid harming others) Keep promises, honor contracts Respect persons and their rights Mutual aid (for ones family and/or community etc) A Rights Approach Everyone should be entitled to realize the following: Right to Life Right to Liberty Right to personal respect

Problems with ethics of duties

Undervaluing outcomes
Complexity

Misplaced optimism?

Contemporary ethical theories

Major Philosophical Ethical Principles (Contd.)

Virtue Ethics (Aristotle and Plato)

Key to good ethics lies not in rules, rights, and

responsibilities, but in the classic notion of character Virtue is the habitual, well established, readiness, or disposition of an individuals powers directing him to some goodness of act. It is a habit of character.

Major Philosophical Ethical Principles

Virtue Ethics (Contd.) Four Cardinal Virtues:

Courage Justice

Temperance
Wisdom

Major Philosophical Ethical Principles (Contd.)

Virtue Ethics (Contd.) Seven Contrary Virtues:

Humility
Kindness Abstinence Chastity Patience Liberality Diligence

Pride
Wrath Gluttony/Greed Lust Wrath Avarice Envy Sloth

Major Philosophical Ethical Principles (Contd.)

Virtue Ethics (Contd.) Practicing these is said to protect one against temptation towards the negative behaviors represented by: Pride (Vanity)

Avarice (Covetousness or Greed)

Lust Wrath

Gluttony
Envy Sloth

Towards a pragmatic use of ethical theory?

Typical Perspective

Ethical Dilemma Lens of ethical theory

Single normative consideration for solving the ethical dilemma

Pluralistic Perspective

Considerations in making ethical decisions: key insights from ethical theories

Consideration
Ones own interests

Typical question you might ask yourself

Theory
Egoism

Is this really in my, or my organizations, best long-term interests? Would it be acceptable and expected for me to think only of the consequences to myself in this situation? Social If I consider all of the possible consequences of my consequences actions, for everyone that is affected, will we be better or worse off overall? How likely are these consequences and how significant are they? Duties to others Who do I have obligations to in this situation? What would happen if everybody acted in the same way as me? Am I treating people only to get what I want for myself (or my organization) or am I thinking also of what they might want too? Entitlements of Whose rights do I need to consider here? Am I others respecting fundamental human rights and peoples need for dignity?

Utilitarianism

Ethics of duty

Ethics of rights

Ethical Styles

Rule bound: obedience to law, rule, principle.

Loyalist: company (or family or country) first.

Prudent: our long-term advantage (self). Virtuous: character, reputation are all important. Intuitive: spontaneous judgment. Empathetic: how does the other person feel? Darwinian: whoever survives is most righteous.

What is an ethical decision?

Main factors in deciding the moral status of a situation

Decision likely to have significant effects on others

Decision likely to be characterised by choice, in that alternative courses of action are open

Decision is perceived as ethically relevant by one or more parties

Why Ethical Decisions are Difficult?

Facts and Values

Knowledge of consequences is limited

Multiple corporate constituencies Ethical Standards are variable (time, place, situation) Human Imperfection Competition

Technology

Stages in ethical decision-making

Ethical decision-making process

Recognise moral issue

Make moral judgement

Establish moral intent

Engage in moral behaviour

Ethical Decision Making and Ethical Leadership

Ethical Issues and Intensity

Individual Factors

Business Ethics Evaluations and Intentions

Ethical or Unethical Behavior

Organizational Factors

Opportunity

Ethical Decision Making and Ethical Leadership (Contd.)

Ethical Issue Intensity reflects the ethical sensitivity of the individual or work group that faces the ethical decision making process. All other factors including individual factors, organizational factors, and intentions determine why different individuals perceive ethical issues differently Individual Factors Education Nationality Age Locus of Control

Ethical Decision Making and Ethical Leadership (Contd.)

Organizational Factors

The context: Leadership, Organization Climate, Structure and Societal Environment Organizational Structure has following strongly related dimensions: The structure of monetary and non monetary rewards The performance-evaluation, monitoring, and control processes for individual and business units The system of portioning and assigning decisionmaking rights and responsibilities to workers, including job design and the level of empowerment

Ethical Decision Making and Ethical Leadership (Contd.)

Opportunity: This describes the conditions in an organization that limit or permit ethical or unethical behavior (rewards and punishment system)

Framework for understanding ethical decision-making

Individual factors

Recognise moral issue

Make moral judgement

Establish moral intent

Engage in moral behaviour

Situational factors

Individual influences on ethical decision-making

Factor Age and gender National and cultural characteristics Influence on ethical decision-making

Education and employment Psychological factors:

Very mixed evidence leading to unclear associations with ethical decision-making. Appear to have a significant effect on ethical beliefs, as well as views of what is deemed an acceptable approach to certain business issues. Somewhat unclear, although some clear differences in ethical decision-making between those with different educational and professional experience seem to be present.

Cognitive moral development Locus of control

Small but significant effect on ethical decision-making. At most a limited effect on decision-making, but can be important in predicting the apportioning of blame/approbation.

Individual influences on ethical decision-making

Factor Personal Values Influence on ethical decision-making Significant influence some empirical evidence citing positive relationship. Significant influence likely, but lack of inclusion in models and empirical tests. A new issue for inclusion with considerable explanatory potential.

Personal integrity

Moral imagination

Psychological factors

Cognitive moral development (CMD) refers to the different levels of reasoning that an individual can apply to ethical issues and problems

3 levels (details next slide) Criticisms of CMD

Gender bias Implicit value judgements Invariance of stages

An individuals locus of control determines the extent to which they believe that they have control over the events in their life

Stages of Moral Development (Kohlberg)

Pre- Conventional Morality 1. Obey to avoid punishment 2. Conform to obtain rewards Conventional Morality 1. Conforming to group norms 2. Conforming to law and order Post- Conventional Morality 1. Principled Morality (autonomous and responsible) 2. Universal Morality (conform to avoid self condemnation)

Situational influences on decisionmaking

Situational influences on ethical decision-making

Type of factor Factor Influence on ethical decision-making Reasonably new factor, but evidence suggests significant effect on ethical decision-making. Fairly limited evidence, but existing studies show strong influence on some aspects of the ethical decision-making process, most notably moral awareness.

Moral Issue-related intensity Moral framing

Rewards
Contextrelated Authority

Strong evidence of relationship between rewards/punishments and ethical behaviour, although other stages in ethical decision-making have been less investigated.
Good general support for a significant influence from immediate superiors and top management on ethical decision-making of subordinates.

Situational influences on ethical decision-making

Type of factor
Factor Influence on ethical decision-making Significant influence on ethical decision-making well documented, but actually exposed to only limited empirical research. Hence, specific consequences for ethical decision-making remain contested. Some influence likely, but lack of empirical evidence to date. Strong overall influence, although implications of relationship between culture and ethical decision-making remain contested. Limited empirical investigation, but some shifts in influence likely.

Bureaucracy

Contextrelated

Work roles Organization al culture National Context

Systems of reward

Adherence to ethical principles and standards stands less chance of being repeated and spread throughout a company when it goes unnoticed and unrewarded What is right in the corporation is not what is right in a mans home or in his church. What is right in the corporation is what the guy above you wants from you. Thats what morality is in the corporation (Jackall, 1988:6)

Authority and Bureaucracy

Bureaucracy Bureaucracy has a number of negative effects on ethical decision-making Suppression of moral autonomy Instrumental morality Distancing Denial of moral status

Authority People do what they are told to do or what they think theyre being told to do

How ethical decisions are justified: Rationalization tactics

Strategy Denial of responsibility Description The actors engaged in corrupt behaviours perceive that they have no other choice than to participate in such activities. The actors are convinced that no one is harmed by their actions; hence the actions are not really corrupt. The actors counter any blame for their actions by arguing that the violated party deserved whatever happened. The actors assume two practices that moderate the salience of corrupt behaviour: 1. Condemn the condemner, 2. Selective social comparison. Examples What can I do? My arm is being twisted. It is none of my business what the corporation does in overseas bribery.

Denial of injury

No one was really harmed It could have been worse.

They deserved it. They chose to participate.

Denial of victim

Social weighting

You have no right to criticise us. Others are worse than we are.

How ethical decisions are justified: Rationalization tactics

Strategy Description Examples We answered to a more important cause. I would not report it because of my loyalty to my boss. Its all right for me to use the internet for personal reasons at work. After all, I do work overtime.

The actors argue that their violation Appeal to higher of norms is due to their attempt to loyalties realize a higher-order value.

The actors argue that they are Metaphor of the entitled to indulge in deviant ledger behaviours because of their accrued credits (time and effort) in their jobs.

Four Rationalizations for Unethical Behavior

A Belief that the Activity is within reasonable Ethical and Legal Limits, that it is not Really Illegal or Immoral A Belief that the Activity is in the individuals or the organizations best interest that the individual would somehow be expected to undertake the Activity A Belief that the Activity is Safe because it will never be found out or publicized A Belief that because the Activity helps the organization, the organization will condone it and even protect the person who engages in it

CLASIC ETHICAL CONFLICTS

Short term vs. Long term Principle vs. Expediency Self interest vs. Others Conflicting Loyalties

Leadership and Ethical Decisions

Strong ethical leadership is characterized by the following: Strong personal character Passion to do right Proactive Considers stakeholders interest Ethical leaders are role models for the organizations values Ethical leaders are transparent and actively involved in decision making They take a holistic view of the organizations ethical culture

The Role of Leadership in Developing an Ethics Program

Conduct a rigorous self assessment of the organizations values and its existing ethics and compliance program Maintain commitment from top managers Publish, post and make quotes of ethics available and understandable Communicate Ethical Standards through multiple channels Provide timely training to reinforce knowledge Ensure consistent implementation Monitor and assess using appropriate methods Revise and reform to ensure continuous improvement

Root Causes of Misconduct

Corporations are viewed not merely as profit making entities but also as moral agents that are accountable for their conduct to their employees, investors, suppliers and customers. A corporate culture without values and appropriate communication about ethics can facilitate individual misconduct

Root Causes of Misconduct

Source: KPMG Forensic Integrity Survey 2005-06

Foundation Principles of Ethics

Exercise Due Care Confidentiality Fidelity to special responsibilities Avoidance of appearance of Conflict of Interest Willing compliance with the law Acting in good faith in negotiation Respect for human well being Respect for liberty and constitutional rights of others

Five Basic Values for Managerial Roles

Integrity Sensitivity

Creative Thinking
Confidence Service Mindedness