You are on page 1of 17

SIBM Bangalore

EMBA Semester 1
Submitted to,
Prof. Atish Das Gupta
By,
Saurabh Pant
Divya Dhrangadharia
Goutham Krishnamurthy
Improving Ethical Behavior
Table of Contents
Table of Contents........................................................................................................................ 2
Abstract....................................................................................................................................... 2
Introduction to Ethics................................................................................................................... 3
Ethical Behavior.................................................................................................................... 3
Unethical Behavior................................................................................................................ 3
hat is an Unethical Behavior!................................................................................................... 3
"alse Communications......................................................................................................... #
Collusion............................................................................................................................... #
$ifts and %ic&bac&s.............................................................................................................. #
Conflict of Interest................................................................................................................. '
Unethical (ractices in the )ealth Care Sector.......................................................................'
Insider Tradin*...................................................................................................................... '
+iscrimination and )arassment............................................................................................'
ron* +oin*......................................................................................................................... ,
hy -eo(le Behave Unethically........................................................................................... ,
Causes of Unethical Behaviors............................................................................................. ,
TE./S I0 A0+ T1-ES 2" ET)ICA3 T)E2.1.........................................................................4
/ana*in* Ethics at or&(lace5................................................................................................. 66
7alues +rive Behavior........................................................................................................ 66
-uttin* 7irtuous 7alues into -ractice..................................................................................62
Behavioral Standards and Codes of Conduct5 The Safety 0et............................................63
The Ethical Behavior "ormula............................................................................................. 63
The Benefits 8 Im(ortance of Ethics in the or&(lace..............................................................6'
Asset -rotection.................................................................................................................. 6'
-roductivity and Team9or&................................................................................................. 6,
-ublic Ima*e....................................................................................................................... 6,
+ecision:/a&in*................................................................................................................. 6,
Abstract
The media bombards us 9ith accounts of unethical behaviors in or*ani;ations 9hich reveal
social issues that demand our attention. These behaviors are from individuals 9ith no moral
character and have raised a lot of concerns about business ethics. This (a(er e<amines the
unethical behaviors, their causes, and the strate*ies for reducin* their occurrence.
Introduction to Ethics
Ethics is the study of morality. It is the value that is 9orth (ursuin* in life. It is honorable
behavior. Ethics is relative. hat is honorable in one society may not be honorable in another. It
de(ends on several factors5 9orld vie9s, descri(tive values and moral values. It is a function of
the environment. hat one sales(erson may consider bein* an unethical mar&etin* behavior,
another sales(erson may (erceive it as an a**ressive mar&etin* strate*y.
Ethical Behavior
Ethics can be illustrated 9ith the (o(ular story of a millionaire 9ho built an 2lym(ic si;e
s9immin* (ool for his evenin* en=oyment. )e filled the (ool 9ith many crocodiles of different
ty(es and si;es. )is o9n idea of en=oyment is to 9atch these crocodiles s9im every evenin*. At
the com(letion of the construction of the s9immin* (ool, he invited all the elites of the city to its
dedication. As (eo(le 9ere eatin* and drin&in*, an announcement 9as made by the host, over
the (ublic address system, that if any youn* man 9as bold enou*h to s9im across the
s9immin* (ool, he 9ould be *iven one of t9o thin*s5 a real estate that 9orths >6 million or his
only beautiful dau*hter in marria*e. Before he finished his announcement, a youn* man =um(ed
into the s9immin* (ool, to the sur(rise of everyone, s9am across the (ool and *ot out 9ithout a
sin*le bruise on his body. The millionaire ran to him, *ave him a bi* hu* and as&ed him 9hat he
9ould li&e to receive out of the t9o. The youn* man said he did not 9ant any of them and that
the only thin* he 9anted 9as, he 9anted to &no9 the bastard 9ho (ushed him into the
s9immin* (ool. That is ethics. The youn* man told the truth. )e did not 9ant any of the t9o
re9ards (romised by the millionaire because he did not, on his o9n, =um( into the (ool. )e 9as
(ushed by an un&no9n (erson. The millionaire too behaved honorably. )e did not believe
anyone could =um( into the s9immin* (ool to s9im across. Since somebody did, he 9as still
9illin* to stand by his 9ords. )e did not say he 9as not 9illin* to *ive his only dau*hter in
marria*e to a stran*er.
Unethical Behavior
The media feeds us 9ith information of unethical behaviors in our environment revealin* the
unethical social issues that demand our attention. The ne9s(a(er accounts of unethical
behaviors in business have raised concerns about business ethics 9hich have led to studies on
their causes in or*ani;ations ?Carroll, 6@4A, #B. These unethical behaviors are from unsavory
individuals that have no moral character. In 6@,6, the survey conducted by .everend .aymond
C. Baumhard S. C., sho9ed that there 9as a very hi*h concern about ethical behaviors. That
concern is hi*her today.
What is an Unethical Behavior?
The Civil Service Commission of -hili((ines defined an unethical behavior as any behavior
(rohibited by la9. In a dynamic business environment, a Dlar*e *ray areaE e<ists that ma&es it
difficult and unclear to distin*uish 9hat is ethical. An unethical behavior 9ould therefore be
defined as one that is not morally honorable or one that is (rohibited by the la9. /any behaviors
9ill fall in the classification includin* corru(tion, mail and 9ire fraud, discrimination and
harassment, insider tradin*, conflicts of interest, im(ro(er use of com(any assets, bribery and
&ic&bac&s, com(liance (rocedures, ethical relations 9ith others, disci(linary action, fraud, ille*al
business donations, (atent infrin*ement and (roduct liability.
Unethical behaviors that stimulated interest in ethics include ater*ate events, 3oc&heed
Scandal, the 6@42 United States (residential election, ille*al business donations and bribery of
forei*n officials in order to induce business abroad?Carroll, 6@4A, 'B. Today, the most common
ones are false communication, collusion, conflicts of interest, *ifts and &ic&bac&s, health
services (rovidersF unfair (ractices, insider tradin*, discrimination and harassment, and
embe;;lement.
alse Communications
"alse communications fall into various cate*ories. They include falsification of auditorFs or
controllerFs re(ort or any form of mani(ulation that does not tell the 9hole truth. These include
cheatin* on ta< returns or ina((ro(riate de(reciation schedule and 9ron* e<(enses ?Brennan
Cr., 7alt;, Shallenber*er 8 Stanton, 6@,6, 6,#B. "eedin* the (ublic 9ith 9ron* re(ort of the
or*ani;ationFs business (erformance to ma&e the or*ani;ation loo& *ood is another common
(ractice. In 2GG6, Enron *ave 9ron* information about their loss because %en 3ay, the CE2 of
Enron, 9as advised by some trusted Enron e<ecutives to re(ort only >6.2 billion of the >4 billion
in losses because it 9as felt that the amount could be e<(lained reasonably 9ithout doin* more
dama*e to the fallin* stoc& (rice of the com(any ?Collins, 2GG4, 3B. Similar to this 9as the case
of /anville Cor(oration. The to( mana*ement of the Cor(oration su((ressed, for decades,
evidence 9hich (roved that asbestos inhalation 9as &illin* their em(loyees.
Collusion
Collusion, es(ecially 9ith com(etitors, to fi< (rices, is an unfair business (ractice today. This
could be considered stealin* from customers. )o9ever, there are differences of o(inion on
9hether or not (rice fi<in* is stealin* from customers ?Brennan Cr., 7alt;, Shallenber*er 8
Stanton, 6@,6, 64#B.
!ifts and "ic#bac#s
Some or*ani;ations do not allo9 their em(loyees to receive *ifts from clients durin* normal
course of business. Those 9ho do, *enerally (rovide *uide lines on limitations as to the amount
an em(loyee can receive as *ift. Sometimes a buyer may reHuest for &ic&bac&s or
entertainment 9hich, if not (rovided, may lead to the loss of the customer. An em(loyee
freHuently receives (ressure from the mana*ement to behave unethically or to obtain (rofitable
business at any cost, 9hich may include the use of any (ossible dirty tric&s. The em(loyees
9ho desire to be retained or (romoted have no choice but to dance to the tune of the
mana*ement. This is because there 9ere cases of those 9ho refused to behave unethically the
9ay mana*ement instructed and 9ere fired or nearly fired ?Brennan Cr., 7alt;, Shallenber*er 8
Stanton, 6@,6, 6,'B.
Conflict of Interest
Conflict of interest occurs 9hen ones (rivate interest interferes or a((ears to interfere in any
9ay 9ith the interest of the or*ani;ation. Accordin* to Sli*lit;, it can be ar*ued that there is no
conflict of interest because, based on Adam SmithFs vie9, the individuals, 9hen (ursuin* their
o9n self:interest are actually (ursuin* the *eneral interest of society ?Sli*lit;, 2GG3, 2B. Some
e<am(les of conflicts of interest are5
divertin* from the or*ani;ation for (ersonal benefit, a business o((ortunity,
usin* the or*ani;ationFs assets for (ersonal benefit,
acce(tin* any valuable thin* from the or*ani;ationFs customers or su((liers, and
havin* a financial interest in an or*ani;ationFs com(etitor.
Unethical $ractices in the %ealth Care Sector
There are three common unethical (ractices in the )ealth Care Sector. The first is refusin* to
(rovide health care services to the (atients 9ho have no medical insurance. Some )ealth
Centers do not admit (atients 9ho have no insurance unless they can (rovide evidence that
they have the ability to (ay for the health service. The second unethical (ractice in the health
care sector is over treatin* (atients to boost income. The third is doin* sur*ery at sur*ical
centers instead of the hos(ital so that the doctors do not have to D(ull call at any hos(italE
?eber, 2GG3,,B.
Insider Trading
Insider tradin* is an unethical behavior 9hich occurs 9hen a (erson 9ho has access to
confidential information uses or shares the information for securities tradin* (ur(oses or any
other (ur(ose e<ce(t the conduct of re*ular com(any business. The confidential information of
the com(any are not to be used for achievin* (ersonal *ain neither are they to be disseminated
directly or indirectly, to friends, family members and other outsiders 9ho may in turn trade on or
misuse the information.
&iscrimination and %arassment
+iscrimination involves not (rovidin* eHual o((ortunity in em(loyment on merit but on other
basis such as race, se<, national ori*in, a*e, reli*ion, or any other basis not related to the =ob.
)arassment is a dero*atory comment or un9elcome se<ual advances ?"S 0et9or&s, Inc., 2GG#,
3B.
Wrong &oing
A lar*e number of (eo(le, includin* to( mana*ement, are involved in 9ron* doin* both in the
(ublic and in the (rivate sectors. The mana*ers of E.E. )utton, for e<am(le, 9ere found *uilty
of 2GGG mail and 9ire fraud. Similarly, the su(ervisors of a defense contractor 9ere accused of
falsifyin* time cards ?$ellerman, 6@A,, A'B.
Wh' (eo$le Behave Unethicall'
+edicated em(loyees, 9ho are usually honest, sometimes behave unethically because of four
rationali;ations5 that no one 9ill ever find out, that the behavior is not really ille*al, that it is in
the best interest of the or*ani;ation, and that the or*ani;ation 9ill (rotect them. Althou*h the
costs of unethical behavior are hard to measure, they can add, accordin* to research, more
than 2GI to the cost of doin* business. The costs 9ill include lo9 9a*es, unem(loyment, and
(overty. If to( mana*ement 9ants to im(rove or*ani;ational (erformance, they must stand firm
that ethical methods are the only 9ays business should be done.
Causes of Unethical Behaviors
The study that 9as commissioned by American /ana*ement Association ?A/AB and 9hich 9as
conducted by the )uman .esource Institute ?).IB usin* 6626 mana*ers and )uman .esource
e<(erts as (artici(ants, revealed that the leadin* cause of unethical cor(orate behavior is
D(ressure to meet unrealistic business ob=ectives and deadlines.E The study also sho9ed that
the second leadin* factor that causes unethical behavior is the desire to further oneFs career
9hile the third leadin* factor is the desire to (rotect oneFs livelihood ?Sch9art;, 2GG,, 6B and
?/ac+o, 2GG,, 6B.
Cob (ressure, accordin* to the study, causes em(loyees to en*a*e in unethical behaviors
that includes cuttin* corners on Huality control, coverin* u( incidents and lyin* to customers.
I*norance is another ma=or cause of unethical behaviors. The study of ?A/AB and ?).IB,
?/ac+o, 2GG,, 6B, revealed that the i*norance that the acts are unethical and not &no9in* the
seriousness of the conseHuences 9hen cau*ht, are causes of unethical behaviors.
Com(etition for scarce resources, (o9er or (osition can cause individuals to en*a*e in
unethical behaviors. )osmer em(hasi;ed that an attem(t to im(rove their cor(orate com(etitive
(ositions made mana*ers to ta&e immoral actions ?)osmer, 6@A4, #3@B. Ba;erman and Bana=i
felt that the cause of the unethical behaviors in or*ani;ations is the (resence of a Dfe9 bad
a((lesE amon* or*ani;ational actors ?Ba;erman 8 Bana=i, 2GG#, 666B. The (rimary cause of
unethical behaviors can be traced to lac& of maintainin* the ty(e of consistent leadershi( that is
necessary for runnin* an ethical or*ani;ation. This e<(oses the em(loyees to o((ortunities that
ma&e them en*a*e in unethical behaviors.
TE)MS I* A*& T+(ES , ET%ICA- T%E,)+
TE-E,-,!ICA- : This describes an ethical theory 9hich =ud*es the ri*htness of an action
in terms of an e<ternal *oal or (ur(ose. So, accordin* to a teleolo*ical theory, conseHuences
al9ays (lay some (art, be it small or lar*e, in the determination of 9hat one should or should
not do. 0ot all teleolo*ical theories are conseHuentialist. Cohn .a9lsJ theory of =ustice is
teleolo*ical, but not conseHuentialist because it claims that conseHuences are only (art of 9hat
must be considered 9hen determinin* 9hat (olicy is morally =ust.
Benefits K
6. There is room in some theories for *ood intentions, even if the action didnFt active the desired
end.
2. Active attem(t to connect morality 9ith the DrealE 9orld.
3. By allo9in* for the consideration of conseHuences, teleolo*ical theories can ada(t to different
circumstances and situations. ?Also see DutilitarianismEB
-roblems : +e(ends on the theory. See DutilitarianismE for an e<am(le.
C,*SE.UE*TIA-IST : Under a conseHuentialist theory, the conseHuences of an action
determine its moral value. A &ey Huestion in conseHuentialist theory is ho9 to measure the
moral 9orth of the conseHuences. ConseHuences can be *ood, neutral, or evil. Another relevant
Huestion is 9hich conseHuences count ?intended or actualB. If only actual conseHuences count,
then do all conseHuences count! ConseHuences can be distin*uished by directLindirect,
individualsLob=ects affected, influence of com(licatin* factors, etc.
All of these considerations *o into sha(in* the ethical theory. "or e<am(le, Ceremy Bentham
and Cohn Stuart /ill 9ere both act utilitarians. So they =ud*ed an individual action to be *ood or
bad de(endin* on the actual conseHuences of that action. Bentham defined *ood as (leasure
and evil as (ain.
?BenthamB
Thus 9hen choosin* an action, accordin* to Bentham, one should
choose the action 9hich (roduces the *reatest amount of (leasure com(ared to (ain for all
affected. Since (leasure and (ain 9ere the foundation for *ood and evil, Dall affectedE 9ould
include all sentient thin*s. C. S. /ill differed from Bentham in that he believed that ha((iness
and unha((iness 9ere the basis for *ood and evil.
?/illB
Under his evaluation then, 9hile (leasure
and (ain 9ere im(ortant considerations, they 9ere only the basic minimum. This sets u( an
ability for /ill to claim that conseHuences to more sentient bein*s may be more im(ortant than
those to less sentient bein*s and to characteri;e some (leasures as hi*her than others.
Benefits K
6. ConseHuentialism is *rounded in actual effect. So, moral action al9ays im(roves life on earth
?in some mannerB. Actin* morally can im(rove your lot in life. So, there is an incentive to act
morally even if you do not believe in an afterlife.
2. ConseHuentialist theories are often attentive to the (articulars of the situation.
3. These theories 9ill allo9 for e<ce(tions to the rule 9hen 9arranted by the outcome.
#. Utilitarianism follo9s the cause and effect reasonin* in science. It can be (roven 9ron* or
ri*ht by referrin* to em(irical evidence, instead of a theoretical ideal.
'. All sentient bein*s understand (ain and (leasure. Thus many have claimed that utilitarianism
is transcultural.
,. 2n a related note, utilitarianism avoids the char*e of s(eciesism in ethical theory by usin* a
moral foundation that is shared by other s(ecies, thus reHuirin* their consideration.
Problems K
6. ConseHuences are difficult to (redict. 1our actions may have *ood intentions and a hi*h
(robability of causin* *ood results. But, if somethin* ha((ens and the conseHuences are
actually bad, then your action 9as morally 9ron*. Also, as the situation involves more (eo(le
and alternatives, it becomes more difficult to determine 9hich action 9ould (roduce the best
conseHuences. )o9 can 9e ever &no9 that 9e actually chose the DbestE alternative. There is no
o((ortunity for com(arison of actual cases, =ust similar ones.
2. M+oes the end al9ays =ustify the means!M A conseHuentialist theory 9ould =ustify many
actions that 9e normally 9ould consider 9ron*, if it turned out that the conseHuences 9ere
*ood.
3. This theory undermines trust in others and intimate relationshi(s since 9e can never be sure
that the conseHuences mi*ht not =ustify a betrayal of trust and in many of these theories, each
individual is treated the same re*ardless of oneJs relationshi(. So, for e<am(le, oneFs duty to
(revent (ain to a stray cat 9ould be eHual to oneFs duty to (revent (ain to oneFs o9n cat.
&E,*T,-,!ICA- : This ty(e of theory claims that there are features 9ithin the actions
themselves 9hich determine 9hether or not they are ri*ht. These features define the e<tent to
9hich the actions conform 9ith reco*ni;ed moral duties. "or e<am(le, drivin* 9hile drun&
violates the duty to Dabove all do no harm.E The duties derive from various sources, such as
reli*ion, biolo*y, (sycholo*y, meta(hysics, culture, lan*ua*e, etc. +e(endin* on the
deontolo*ical theory, these duties may be absolute ?no e<ce(tionsB, (rima facie ?can only be
overridden by a more im(ortant dutyB, or conditional ?only hold under s(ecified circumstancesB.
+eontolo*ical theories do not consider conseHuences to be im(ortant 9hen determinin*
9hether or not an action is ethical. It doesnFt matter if the drun& driver made it home safely.
+rivin* drun& 9as still 9ron* because the intention to drive drun& 9as 9ron* ?or to drin& alcohol
9hen one &no9s one needs to driveB.
Immanuel %antJs ethical theory is deontolo*ical. )e claims that actions are only morally ri*ht
9hen they are done out of duty. )e sees moral duties as unchan*in* la9s for human conduct.
)e believes that morality is derived from the ability to thin& rationally, 9hich enables bein*s to
be free. If one is not free, then one cannot be held res(onsible. Thus only free individuals are
moral a*ents and all free individuals are ca(able of actin* out of reason. %antFs moral theory is
lar*ely focused on (rotectin* and (romotin* the free action of rational bein*s. Three
formulations of his cate*orical im(erative are derived from this moral foundation5
?%antB
Al9ays act out of duty, in accordance 9ith a *ood 9ill ?I.e. 2ne does the ri*ht thin* because one
reco*ni;es that it is the ri*ht thin* to do, not because it (leases you to do it or 9ill (romote *ood
conseHuences.B
Al9ays act as if the ma<im of thy action 9ere to become by thy 9ill a Universal 3a9 of 0ature
?i.e. Are you 9illin* to allo9 any other rational bein* to act on the same reasonin* you used to
=ustify your action!B
Act as to treat the ca(acity for rationality, 9hether in thine o9n (erson or in that of any other, in
every case as an end 9ithal, never as a means only. ?i.e. 0ever treat a rational bein* as a mere
means to an end.B
Benefits K
6. .i*ht and 9ron* actions are easily determined by considerin* oneJs duties. In some cases,
these are e<(licitly s(elled out ?i.e. reli*ionB. )o9ever, the use of =ud*ement is usually
necessary to determine 9hich duties a((ly and ho9.
2. Unli&e utilitarianism, the end does not =ustify the means. +eontolo*ical theories (rovide a
sound basis for inalienable ri*hts and inherent value.
3. Since duties do not chan*e, there is a *reater sense of securityL(redictability in the acce(ted
behavior of others. .i*ht and 9ron* donFt vary 9ith the conseHuences, althou*h there may be a
various accordin* to circumstances ?i.e. in the case of conflictin* dutiesB.
#. $ood motives are valued, even if the outcome 9asnFt 9hat you e<(ected..
Problems K
6. There is no a*reement on a sin*le standard for morality.
2. I*norin* conseHuences can cause (ain and sufferin*.
3. The im(osition of a s(ecific moral belief system on others has been a cause of si*nificant
harm throu*hout history. Some deontolo*ical theories are not eHui((ed to res(ect diverse
beliefs. )o9ever there are some deontolo*ical theories that incor(orate res(ect for the beliefs
of others. There are even some reli*ious:based theories 9hich, 9hile es(ousin* one true 9ay
also res(ect diverse beliefs amon*st individuals ?i.e. Buddhist ethicsB.
)E-ATI/ISM0SUB1ECTI/ISM : This ty(e of theory denies that there is any uniHuely
ri*ht moral theory, standard, or value. Everythin* is sub=ective. "or e<am(le, Cean -aul Sartre
claimed that each individual creates his or her o9n morality based solely on oneJs o9n
decisions about 9hat is valuable. There are no moral standards to turn to that have any more
authority than those that you create. Thin*s ?includin* other (eo(leB only have value because
you *ave them value.
?SartreB
Benefits K
6. Ad=usts for chan*in* factors in society and allo9s for true multiculturalism.
2. Each individual is fully res(onsible for hisLher o9n moral beliefs since heLshe chose to create
and value them.
-roblems K
6. This leads to social anarchy. /oral theories are tools that are su((osed to hel( (eo(le live
to*ether 9ith some de*ree of harmony and security. But, if you acce(t that morality is truly
relative, you have to acce(t that there is no standard by 9hich you can =ud*e the moral beliefs
of others.?e<. The 0a;is, %%%, etc.B
2. hat is the meanin* of morality if it lac&s any standard to =ud*e such claims other than
individual choice!
/I)TUE BASE& T%E,)IES : Teleolo*ical theories consider the *oals of actions.
+eontolo*ical theories focus on actin* in accordance 9ith moral duties and obli*ations. 7irtue
based theories focus on the character of the (erson. Accordin* to virtue based theories, ethics
is about 9hat sort of (erson one should strive to become. The Hualities that one should develo(
in oneself are called virtues ?e<. honesty, fairness, &indness, faithfulness, *enerosity, (rudence,
inte*rity, bravery, etc.B.
2ne should act in 9ays that develo( these virtuous Hualities 9ithin oneself. "or e<am(le,
Aristotle claimed that in order to become an honest (erson, one should tell the truth.
?AristotleB
Eventually it becomes a habit. Alon*, the 9ay one learns ho9 to tell the truth a((ro(riately,
9ithout bein* brutally honest all of the time or lyin* 9henever it is easier to do so. There are
many virtues that one ou*ht to develo( throu*h (ractice over oneFs lifetime. Becomin* virtuous
is e<cellin* at all of the virtues that ma&e a *ood human bein*, health care (rofessional, etc. It is
a learnin* (rocess that continues throu*hout your life.
Benefits K
6. This ty(e of theory reco*ni;es that individuals and circumstances are uniHue. "or e<am(le,
the virtue of com(assion may be e<(ressed by t9o (eo(le in t9o different 9ays. Similarly,
runnin* into a burnin* buildin* may be coura*eous action for a fire (rofessional but foolhardy for
an untrained individual 9ith no (rotective eHui(ment.
2. 7irtue ethics allo9s each individual to use hisLher o9n =ud*ement 9hen ma&in* difficult moral
decisions, yet reco*ni;es certain common *oals.
3. /ista&es are e<(ected and reco*ni;ed as learnin* o((ortunities.
Problems K
6. Some ar*ue that too much is left to individual =ud*ement, thus o(enin* the door to bias and
(re=udice.
2. Similarly, virtues can be inter(reted very differently. "or e<am(le, consider the many 9ays
that fairness may be inter(reted.
3. 7irtue ethics de(ends on modelin* for some of the education. )o9ever, one may choose a
(oor role:model and therefore develo( a false sense of virtue.
Managing Ethics at Wor#$lace2
7alues drive behavior and therefore need to be consciously stated, but they also need to be
affirmed by actions.
Ethics is about behavior. In the face of dilemma, it is about doin* the ri*ht thin*. Ethical
mana*erial leaders and their (eo(le ta&e the Dri*htE and D*oodE (ath 9hen they come to the
ethical choice (oints.
/ana*erial leaders and their (eo(le are invited to e<(lore ho9 values, actions, and behavioral
standards can hel( steer or*ani;ational behavior.
/alues &rive Behavior
A 9ell:used a<iom in or*ani;ational behavior thou*ht asserts that values ultimately drive our
behavior. In a nutshell, values e<ert influence over our attitudes, and attitudes influence our
behavior. 7alues are inte*ral to attitude formation and to ho9 9e res(ond to (eo(le and
situations. E<tensive literature e<ists dealin* 9ith ho9 values relate to effective mana*erial
leadershi(. A revie9 of this body of 9or& leaves us 9ith the clear (icture that values are a &ey
com(onent of effective mana*erial leadershi(.
Value Attitude Ethical Behavior
isdom and
%no9led*e
E<(erience (romotes 9isdom that hel(s
convert information to &no9led*e.
Usin* &no9led*e to solve (roblems ethically
and to do 9hat is ri*ht.
Self:Control
Self:control means effectively mana*in*
reactions to challen*in* situations and
tem(tations.
-uttin* (ersonal motivations aside and
actin* 9ith ob=ectivity by doin* 9hat is ri*ht.
Custice
Actin* =ustly and fairly is a lon*:term
driver of ethical behaviorN remember the
D$olden .ule.E
Establishin* =ust and mutually a*reed u(on
criteria and administerin* them fairly to all
(eo(le.
Transcendence
The belief in a (o9er and source
outside oneself reduces self:servin*
actions and increases humility.
-uttin* institutional andLor sta&eholder
interests above self:interests. Identifyin* a
(ersonal (ur(ose that is ali*ned 9ith
or*ani;ational mission.
3ove and
%indness
Treatin* (eo(le 9ith &indness hel(s
increase the reservoir of (ositive
affection and love.
.eco*ni;in* and encoura*in* others for
their contributions.
Coura*e and
Inte*rity
Ethics reHuires the coura*e to do the
ri*ht thin*s consistently 9ithout re*ard
to (ersonal conseHuences.
/a&in* un(o(ular decisions based on fair
consideration of the facts.
(utting /irtuous /alues into (ractice
Dhat can mana*erial leaders do on a (roactive basis to encoura*e ethical behavior! At least
five (ractices hel( leaders steer their or*ani;ations to9ard ethical conduct.
"irst, any *a( bet9een &no9led*e about 9hat to do and actual actions needs to be closed. If
you &no9 9hat is the ri*ht thin* to do, =ust do it. Unfortunately, too often D9hite collarE criminals
9ill tell us that they &ne9 9hat 9as ri*ht, yet they failed to do it. Cohn /a<9ell, in his recent
boo& DThereFs 0o Such Thin* as Business Ethics,E e<(lains various reasons for ethical
trans*ressions, includin* that (eo(le =ust rationali;e their choices 9ith relativism. hile the
reasons for the trans*ressorFs actions are varied and com(le<, the sim(le truth is that they failed
to Ddo the ri*ht thin*E in s(ite of their &no9led*e. They did not act 9ith 9isdom.
Second, mana*erial leaders must be very deliberate about 9ho =oins their or*ani;ation. /any
or*ani;ational leaders believe that selectin* (eo(le for their values is as im(ortant as selectin*
for s&ill sets. Cim Collins, in his com(ellin* boo& $ood to $reat5 hy Some Com(anies /a&e
the 3ea( . . . and 2thers +onFt, underscores ho9 lon*:term success de(ends on (uttin* the
ri*ht (eo(le in (lace. 3arry Bossidy, as CE2 of Allied Si*nal, made (eo(le selection a to(
(riority and considered it a &ey tas& of to( mana*ement. Selectin* (eo(le 9ho share your
virtuous values is critical to buildin* an ethical culture and lon*:term business success.
Third, ne9 (ersonnel need to be sociali;ed into the or*ani;ation so as to advance virtuous
values. As an e<ecutive, I re*ularly attended ne9 em(loyee orientations to es(ouse the
or*ani;ationFs values. As a 9ay of (romotin* and influencin* ethical behavior, it is very (o9erful
for ne9 em(loyees to hear mana*erial leaders es(ouse core virtuous values and to see those
values affirmed throu*h the actions of others in the or*ani;ation.
"ourth, accountability and follo9:u( are critical in (uttin* virtuous values into (ractice. Systems
and (rocedures can remind (eo(le of commitments and hel( connect 9ords or (romises 9ith
deeds. In or*ani;ations 9ith behavioral inte*rity, 9ords and deeds count. hen virtuous values
are drivin* behavior, the ali*nment of 9ords and deeds serves to advance the creation of an
ethical 9or& culture.
"inally, mana*erial leaders can (ositively im(act the (ractice of ethical behavior by fairly
allocatin* or*ani;ational resources and lin&in* them a((ro(riately. All mana*erial leaders have
five &ey resources to mana*e5 (eo(le, money, ca(ital assets, information, and time. Allocation
of these resources and the (rocess mana*ers use to accom(lish such distribution can create
(erce(tions of eHuity and fairness, or ineHuity and unfairness. /ana*erial leaders 9ho value
=ustice and fairness are more li&ely to deal the cards fairly O thereby modelin* ethical behavior
O than are those 9ho do not.
Behavioral Standards and Codes of Conduct2 The Safet' *et
Ideally, mana*erial leaders and their (eo(le 9ill act ethically as a result of their internali;ed
virtuous core values. I li&e to thin& of this as ethics from the Dinside out.E .elyin* solely on this
Dinside outE a((roach, ho9ever, is sim(ly naPve in many circumstances.
Established behavioral standards and 9ritten codes of ethical conduct can hel( bolster virtuous
values and (romote ethical or*ani;ational behavior. Behavioral standards usually incor(orate
s(ecific *uidelines for actin* 9ithin s(ecific functional 9or&(lace areas. "or e<am(le, a sales
de(artment may clearly outline criteria for e<(ense reimbursements.
Codes of ethical conduct have received varyin* de*rees of attention over the (ast three
decades. They can be cate*ori;ed into three ty(es5
ype !" Ins(irational:Idealistic codes of conduct s(ecify *lobal themes such as DBe honest,E
DSho9 inte*rity in all matters,E D-ractice 9ise decision ma&in*,E etc. Such themes are not
anchored to s(ecific behavior or situations.
ype #" .e*ulatory codes of conduct (roscribe clearly delineated conduct. This ty(e of code is
desi*ned to hel( as a =uris(rudential tool 9hen dis(utes occur. It is more of a Ddo and donFtE
a((roach.
ype $" EducationalL3earnin*:2riented codes of conduct offer (rinci(les to *uide decision
ma&in* and behavioral reactions into li&ely situations. This a((roach is com(atible 9ith buildin*
a learnin* or*ani;ational culture. "or e<am(le, the (rinci(le and value of fairness mi*ht be
a((lied to allocatin* a bonus (ool. /ana*erial leaders res(onsible for this (rocess could be
en*a*ed in scenarios 9herein they 9ould be as&ed to ta&e Dfair actionE in ma&in* these
allocations. Such learnin* e<(eriences can serve to enli*hten and inform so as to foster ethical
decision ma&in*.
Behavioral standards and codes of ethical conduct can hel( steer ethical behavior by offerin* a
cue or 9ritten rule to remind (ersonnel of the ri*ht thin* to doKan Doutside inE (rocess for ethical
behavior mana*ement. These standards and codes tri**er (eo(lesF internali;ed values, thus
*ainin* stren*th throu*h firm yet fairly administered conseHuences.
The Ethical Behavior ormula
Ta&en to*ether, virtuous values, actions, and behavioral standardsLcodes can (roduce a
Dformula,E such as that illustrated belo9, that may increase the li&elihood of ethical
or*ani;ational behavior5
Virtuous Values % Aligned Action % Behavioral Standards&'odes () *ncreased Ethical
Behavior
Consider ada(tin* the si< virtuous values and ali*nin* them 9ith &ey mana*erial leadershi(
actions such as selection, em(loyee orientationLsociali;ation, and allocation of resources.
Behavioral standards andLor codes of ethical conduct can be added as a((ro(riate. Actin* on
these three formula com(onents may serve to increase the dis(lay of ethical or*ani;ational
behavior.
hree Good +easons to Apply the ,ormula
There are at least three *ood reasons to (ractice ethical behavior in your or*ani;ation. These
reasons may motivate you to ada(t the DformulaE into your mana*erial leadershi( (ractice
re(ertoire.
Q "irst, it is the ri*ht thin* to do. Em(loyees and e<ternal sta&eholders ali&e 9ant and
deserve to be treated ethically. Ta&en to the e<treme, a culture allo9in* unethical behavior can
breed all manner of dama*in* and even criminal activity.
Q Second, it ma&es economic sense. A mountin* body of evidence sho9s that an
em(hasis on the softer sides of business, includin* ethics, (ositively influences the harder
traditional bottom line. By listenin* to em(loyees, effectively reco*ni;in* their 9or&, and
(racticin* *ood ethical behavior, mana*ers have *iven a boost to such hard measures as
o(eratin* earnin*s, .2I, and stoc& (rice.R#S
Q Third, in line 9ith a *ro9in* trend to loo& beyond shareholder value to a broader
sta&eholder (ers(ective, or*ani;ational ethical behavior becomes the socially res(onsible thin*
to do. Cust thin& for a moment about the im(act of EnronFs, TycoFs and orld ComFs unethical
behavior on their res(ective communities, 9or&forces, and other sta&eholders.
The Benefits 3 Im$ortance of Ethics in the Wor#$lace
The Ethics .esource Center re(orts that non:unioni;ed em(loyees (erceive stron*er ethical
cultures 9ithin their or*ani;ations than their unioni;ed counter(arts. The non:(rofit or*ani;ation
also re(orts that youn* 9or&ers are more li&ely to (erceive 9ea& ethical cultures 9ithin their
com(anies than older ones. /ana*ers also tend to value stron*er ethical cultures than
em(loyees in non:mana*ement (ositions. It is your duty as a mana*er to incor(orate and
mana*e a stron* ethical culture 9ithin your business. or&(lace ethics are si*nificant to your
business and (rovide numerous benefits.
Asset (rotection
A stron* ethical culture 9ithin your business is im(ortant in safe*uardin* your assets.
Em(loyees 9ho abide by your 9or&(lace ethics 9ould be able to (rotect and res(ect your
businessFs assets. "or e<am(le, they 9ould avoid ma&in* (ersonal lon* distance calls usin* the
businessFs lines. or&ers can only res(ect com(any (ro(erty 9hen you treat them 9ith res(ect
and di*nity, 9hich ma&es them feel (roud to be 9or&in* for your business. Ensure that your
9or&ers (erform in an environment 9ith inte*rity and stron* ethics. It increases em(loyee (ride
and discoura*es them from stealin* su((lies or eHui(ment.
(roductivit' and Team4or#
or&(lace ethics is inte*ral in fosterin* increased (roductivity and team9or& amon* your
em(loyees. It hel(s in ali*nin* the values of your business 9ith those of your 9or&ers.
Achievin* this ali*nment reHuires that you encoura*e consistent dialo*ue re*ardin* the values
of your business, 9hich enhances community, inte*rity and o(enness amon* em(loyees. Ethics
enable your 9or&ers to feel a stron* ali*nment bet9een their values and those of your business.
They sho9 such feelin*s throu*h increased (roductivity and motivation.
(ublic Image
1ou earn a lot of res(ect and cultivate a stron* ima*e in the (ublic domain 9hen you ma&e
ethical choices. "or instance, you can fulfill your cor(orate social res(onsibility by reducin*
9aste dischar*e from your business. The (ublic 9ould consider your business to be o(eratin*
9ith honor and inte*rity 9hile valuin* (eo(le over (rofits. Buildin* a stron* (ublic ima*e throu*h
ethical conduct also earns you more clients. Customers 9ould develo( trust in you and do
business 9ith your or*ani;ation.
&ecision5Ma#ing
Ethical conduct in the 9or&(lace encoura*es a culture of ma&in* decisions based on ethics. It
also enhances accountability and trans(arency 9hen underta&in* any business decisions.
+urin* turbulent times, a stron* ethical culture *uides you in mana*in* such conflicts by ma&in*
the ri*ht moves. It can hel( you to introduce chan*e successfully in your or*ani;ation, 9hich
can be a challen*e. Ethical conduct 9ithin the business sensiti;es you and your staff on ho9 to
act consistently even in difficult times.
'onclusion
Today, there is a tremendous loss of confidence in cor(orate conduct and there is an ur*ent
need to 9or& to9ards restorin* it. Althou*h ethics education seem to (roduce limited evidence
of chan*in* behaviors, the commitment of mana*ement to monitor annual ethics education for
all em(loyees 9ill (roduce the desired favorable results. There should be clear communication
to the em(loyees of 9hat are honorable and e<(ected behaviors in the or*ani;ation. They must
maintain and stand firm on a clear cut (olicy that ethical methods are the only 9ay of doin*
business.
+eferences5
Aristotle. The 0icomachean Ethics, elldon, C. trans. -rometheus Boo&s ?Buffalo, 015 6@A4B.
)osmer, 3a.ue C. ?6@A4B, DThe Institutionali;ation of Unethical Behavior.E The Journal of
Business Ethics, #3@ K ##4.
eber, +avid 2. ?2GG'B. DUnethical Business -ractices in U.S. )ealth Care Alarm
-hysician 3eaders.E S(ecial .e(ort5 Ethical +ebatesLEthical Breaches
/cShuls&is, Elaine ?Culy, 6@@4B. DCob stress can (rom(t unethical behavior,E HR Magazine. 22:
2#.
0ational +efense University. ?6@A,B. DStrate*ic 3eadershi( and +ecision /a&in*.E
LL999.au.af.milLauLa9cLa9c*ateLnduLstrat:ldr:dmLcomt.html. 6:6G.
Sti*lit;, C.E. ?2GG3B DEthics, mar&et and $overnment "ailure, and $lobali;ation.E