EPM-1183 Ethics, Code of Conduct & Professional Practice

EPM-1183
ETHICS, CODE OF CONDUCT &

PROFESSIONAL PRACTICE
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INTRODUCTION TO ETHICS
WHAT IS ETHICS?
Ethics is a system of moral principles that affect how people make decisions and
live their lives. Ethics is concerned with what is good for individuals and society1.
The word ethics is derived from the Greek word” ethos” which means “way of
living”. It is a branch of philosophy that is concerned with human conduct,
specifically the behaviour of individuals in society. Ethics examines the rational
justification for our moral judgments; it studies what is morally right or wrong, just
or unjust2.
When viewed from a broad perspective, ethics reflects on human beings and their
interaction with nature and with other humans, on freedom, on responsibility and on
justice. Generally, ethics is concerned with human independence when it focuses on
the relationship that exists between humans and the world. This independence is the
primary condition in ethical decision-making and in any objective analysis of the
facts. Individuals demonstrate independence when, in a decision-making process,
they choose to free themselves as much as possible from their conditioning. Insofar
as this operation assumes a degree of lucidity that allows us to judge objectively and
to decide what direction to take, it will be understood that making ethical decisions
is difficult3.
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Years ago, Sociologist Raymond Baumhart is said to have asked a number of
business people “What does ethics mean to you”? some of the responses he received
were:
• "Ethics has to do with what my feelings tell me is right or wrong."
• "Ethics has to do with my religious beliefs."
• "Being ethical is doing what the law requires."
• "Ethics consists of the standards of behaviour our society accepts."
1
BBC, Ethics Guide. http://www.bbc.co.uk/ethics/introduction/intro_1.shtml (Accessed on June 02, 2020).
2
Government of Canada, Values and Ethics of the Public Service. https://www.canada.ca/en/treasury-board-
secretariat/services/values-ethics/code/what-is-ethics.html (Accessed on June 02, 2020).
3
secretariat/services/values-ethics/code/what-is-ethics.html (Accessed on June 02, 2020
4
Markkula Centre for Applied Ethics at Santa Clara University, What is Ethics?
https://www.scu.edu/ethics/ethics-resources/ethical-decision-making/what-is-ethics/(Accessed on June 02,
2020).
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• "I don't know what the word means.”
These responses illustrate that ethics is understood differently by different people.
Many see ethics through different frames of refence that may be emotional,
religious, cultural, legal or societal.
Some people tend to equate ethics with their feelings. But being ethical is clearly
not a matter of following one's feelings. A person following his or her feelings may
actually recoil from doing what is right. In fact, feelings frequently deviate from
what is ethical.5 For instance an employee who may be poorly paid and feels cheated
by his employer may feel justified in carrying out unethical acts of theft of company
data to sell to a competitor in retaliation.
Nor should one identify ethics with religion. Many religions, advocate high ethical
standards. Yet if ethics were confined to religion, then ethics would apply only to
religious people. But ethics applies as much to the behaviour of the atheist as to that
of the devout religious person. Religion can set high ethical standards and can
provide intense motivations for ethical behaviour. Ethics, however, cannot be
confined to religion nor is it the same as religion.
Being ethical is also not the same as following the law. The law often incorporates
ethical standards to which many citizens subscribe. But laws, like feelings, can
deviate from what is ethical. For example, pre-American Civil War slavery laws,
Jim Crow laws of segregation and the old apartheid laws of South Africa are
grotesquely obvious examples of laws that deviate from what is ethical.
Also, being ethical is not the same as doing "whatever society accepts." If this was
so, then to find out what is ethical, one would have to find out what society accepts.
To decide what I should think about abortion, for example, I would have to take a
survey of society and then conform my beliefs to whatever society accepts. But no
one ever tries to decide an ethical issue from a survey. Also, limited social consensus
on many issues makes it impossible to equate ethics with whatever society accepts.
For instance, some people accept abortion but many others do not. If being ethical
were doing whatever society accepts, one would have to find an agreement on issues
which does not, in fact, exist. Though in any society, most people accept standards
that are, in fact, ethical, standards of behaviour in society can deviate from what is
ethical. An entire society can become ethically corrupt. Nazi Germany is a good
example of a morally corrupt society. History is replete with examples of societies
that degenerated into ethical corruption.
What then is ethics? Ethics is based on well-founded standards of right and wrong
that prescribe what humans ought to do, usually in terms of rights, obligations,
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benefits to society, fairness, or specific virtues.
Ethics, refers to those standards that impose the reasonable obligations to refrain
from rape, stealing, murder, assault, slander, abuse and fraud. Ethical standards also
include those that enjoin virtues of honesty, compassion, responsibility and loyalty.
Ethical standards include standards relating to rights, such as the right to life, the
right to freedom from injury, and the right to privacy. Such standards are regarded
as adequate standards of ethics because they are supported by consistent and well-
founded reasons.
Ethics refers to the study and development of one's ethical standards. As mentioned
above, feelings, laws, and social norms can deviate from what is ethical. It is
therefore necessary to constantly examine one's standards to ensure that they are
reasonable and well-founded. Ethics also means, then, the continuous effort of
studying our own moral beliefs and our moral conduct, and striving to ensure that
we, and the institutions we help to shape, live up to standards that are reasonable
and solidly-based6. Through this continuous effort and dialogue, ethics as a principle
can now take the form of applied ethics.
WHAT IS APPLIED ETHICS?

Applied ethics are the practice of ethics, in particular the philosophy of language
that aims to guide the moral judgment governing the decisions we make in all areas
of our lives. Applied ethics presupposes language because it depends on dialogue
to attain this objective.7
Applied ethics are an Educational practice: It aims to accelerate the awareness
process and to accompany the exercise of judgment, because “moral judgment
cannot be learned; it must be cultivated”.
Applied ethics are a Political practice: It seeks to establish optimum conditions
for exercising moral judgment. Applied ethics are a political practice because it is
“concerned with the common good”.
Applied ethics are a Philosophical practice: It aims to develop systematic,
creative criticism based on meditation on human excellence.
Naturally this threefold perspective on applied ethics implies the introduction of a
detailed program to promote values and ethics professionally. Implementation of
such a program assumes an honest dialogue. Honest dialogue is the basis of the
democratization of structures and ethical management of trust. Basically, it is a
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matter of “encountering the good” by deploying a democratic conscience shared
through dialogue.
WHAT ARE VALUES AND ETHICS?

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“Values and ethics represent what most of us put into practice through our actions
every day. They describe the way we strive to work with our colleagues, our partners
and our clients. They explain the spirit that enables us to do our jobs. Our values,
what seems desirable to us, what is important to us, what we esteem and seek to
achieve, are thus reflected in what we do every day.”i
As individuals, our values have been formed by our culture in the broad sense; for
example, the values we have from our family, our education or our cultural
experiences. As project management professionals, our values are moulded by the
traditions and culture of acceptable professional practice and business.
It is important to understand that values and ethics provide a framework for
decision-making and leadership. Establishing an ethics regime, in any workplace
setting, is not a single initiative but rather a comprehensive series of initiatives,
mutually supporting and complementing one another. No rule alone can encourage
citizens, employees or professionals to develop the conciliatory spirit that will
enable them to act responsibly, honestly and fairly. A code alone is not sufficient to
promote values and ethical standards in any work setting. There must be continuing
dialogue, so that it will be possible to incorporate values and ethics into all decisions
and all acts. The main challenge is thus to combine the two approaches: the one
based on values, and the other based on rules. For this reason many organisations
have ethics programs that combine the two approaches one values based and the
other compliance or rules based.
BUSINESS ETHICS
A business is a productive organization—an organization whose purpose is to create
goods and services for sale, usually at a profit. Business is also an activity. One
entity (e.g., a person, an organization) “does business” with another when it
exchanges a good or service for valuable consideration. Business ethics can thus be
understood as the study of the ethical dimensions of productive organizations and
commercial activities. This includes ethical analysis of the production, distribution,
marketing, sale, and consumption of goods and services.9. Business ethics means
applying general ethical values to business activities, behaviour and decisions.
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9
Moriarty, Jeffrey, "Business Ethics", The Stanford Encyclopaedia of Philosophy (Fall 2017 Edition),
Edward N. Zalta (ed.), URL = <https://plato.stanford.edu/archives/fall2017/entries/ethics-
business/>.(Accessed on June 03,2020)
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Moral reasoning undergirds ethical practices and four general views are prevalent:
• Individual View: Does the decision promote one’s long term self interests.
• Utilitarian View: Does the decision promote the greater good for the most
people.
• Moral-Rights View: Does the decision or behaviour promote the universal
rights of all human beings.
• Justice View: Does the decision or behaviour promote fairness and
impartiality.
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Questions in business ethics are important and relevant to everyone. This is
because most of us engage in commercial transactions every day. Moreover, many
of us spend a major portion of our lives engaged in, or preparing to engage in,
productive activity, on our own or as part of productive organizations. Business
activity shapes the world we live in, sometimes for good and sometimes for ill.
Central questions in business ethics, include:
• In whose interests should firms be managed?
• Who should manage them?
• What do firms owe their workers, and what do workers owe their firms?
• What moral rules should guide firms’ engagement with customers?
• Should firms try to solve social problems?
• What responsibility do they have for the behaviour of their suppliers?
• What role should firms play in the political process?
Over the last few decades, the explosion of digital technologies has introduced new
compelling questions to business ethics questions. Technology so often a disruptor
has forced new considerations with ethics privacy, confidentiality, security and
business and consumer protection have been placed increasingly under the
microscope.
Advances in technology have not only caused us to revisit laws but also human
value systems and limits. We have come to understand that technology is not neutral
but comes with inherent ethical implications. For instance, advancements in
technology over the last two centuries have resulted in the development of the
10
Rupal, E.. Business Ethics. https://www.slideshare.net/rupaleeslideshare/ethics-12132965 (Accessed June
3, 2020).
11
Moriarty, Jeffrey, "Business Ethics", The Stanford Encyclopaedia of Philosophy (Fall 2017 Edition),
Edward N. Zalta (ed.), URL = <https://plato.stanford.edu/archives/fall2017/entries/ethics-
business/>.(Accessed on June 03,2020)
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camera and the creation of photo journalism. These days, every smart phone comes
with cameras capable of capturing good photographs resulting in an explosion in
the number of amateur photographers and photo journalists.
The first photos that were used in courtrooms in the early twentieth century raised
debates about legal rights and privacy now disrupted by photographs and how
photographs should be used. The discussion went beyond legal rights and centred
around the very ethical implications of a technology (the camera) that could
reproduce the appearance of an individual with such accuracy. It was an
examination of the particularly human consequences (distress and humiliation) of
the capacities of this new technology. Defining a right and wrong and attempting to
morally manage its implications for individuals.12
An illustrative case was one in New York in 1924, in which photographers were
barred from taking pictures of a sensational courtroom drama, the Evening Graphic
a newspaper, decided to piece together a photographic representation using twenty
different images in the darkroom. The composite picture depicted what the scene
might have looked like was published on the newspaper’s front page and showed
the rear view of a lady who was attempting to show physical evidence stripped to
her waist in court. The public reaction was immediate, though the image may have
been considered unethical by some and would be considered ethically heinous
today, the public loved it and the newspaper’s circulation jumped 500% overnight.13
VARIETIES OF BUSINESS ETHICS

Professionals engaged in business activity, including project managers, are often
bound by codes of conduct promulgated by professional associations and societies.
In addition, many firms also have detailed codes of conduct as part of ethics
programs, developed and enforced by teams of ethics and compliance personnel.
Business ethics can thus be understood as the study of the content, development,
management, and effectiveness of the systems of values and compliance including
codes of conduct designed to guide the actions of people engaged in business
activity.
Considered only as a normative14 enterprise, business ethics—like many areas of
applied ethics—draws from a variety of disciplines, including ethics, political
philosophy, economics, psychology, law, and public policy. This is because
remedies for unethical behaviour in business can take various forms, from
exhortations and norms directed at private individuals to change their behaviour to
12
Bersak, Daniel 2006. Ethics in Photojournalism: Past, Present and Future. (2006)
http://web.mit.edu/drb/Public/Bersak_CMS_Thesis_FINAL.pdf. (Accessed June 3, 2020)
13
Bersak, Daniel 2006. Ethics in Photojournalism: Past, Present and Future. (2006)
http://web.mit.edu/drb/Public/Bersak_CMS_Thesis_FINAL.pdf. (Accessed June 3, 2020)
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Normative implies a process, structure or model for improvement and not what exists
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new laws, policies, and regulations. Doing business ethics well means being familiar
with results in these disciplines, or at least being aware of gaps in one’s own
knowledge.
ETHICS AND CULTURE

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Three schools of thought about the extent to which ethical standards apply across
countries and cultures exist: Ethical Universalism, Ethical Relativism and the
Integrative Social Contracts Theory
Cultural Relativism – Suggests that there is no one right way to behave; cultural
relativists believe that context determines ethical behaviour. Ethics and Culture.
Concept of Ethical Universalism

According to the school of ethical universalism, the standards of right and wrong
are universal and transcend cultures, societies, and religions. Universal agreement
on basic moral standards allows a multinational company to develop a code of ethics
that is applied evenly across its worldwide operations.
Ethical universalism undergirds the United Nations Universal Declaration of
Human Rights which states in its
• Article 1 that “All human beings are born free and equal in dignity and right”,
• Article 18 “Everyone has the right to freedom of thought, conscience, and
religion”
• Article 19 “Everyone has the right to freedom of opinion and expression”.
• Article 23 “Everyone has the right to work, to free choice of employment, to
just and favourable conditions of work”.
• Article 26“Everyone has the right to education.”
Concept of Ethical Relativism

According to the school of ethical relativism, what is ethical or unethical must be
judged in light of local moral standards and can vary from one country to another
Some companies base their code of conduct upon the principle of ethical relativism
assume that local morality is an adequate guide for ethical behaviour. Interestingly
others may have a universal code of conduct but actually practice ethical relativism.
The long history of multi-national organisations with strong universal codes of
conduct taking advantage of relatively lax local ethical cultures to procure large
contracts is well known.
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Drawbacks of Ethical Relativism
The ethical relativism rule of “when in Rome, do as the Romans do” presents
problems – It is ethically dangerous for company personnel to assume that local
ethical standards are an adequate guide to ethical behaviour » What if local
standards condone kickbacks and bribery? » What if local standards blink at
environmental degradation?
The story is told of a team of technology project managers from a global technology
consulting behemoth with a strong universal code of conduct that participated in a
three week pro bono “Corps” service in a developing country and received a “gift”
of the equivalent of $500 after carrying out a training in a public service department.
This was standard practice for the public sector of that country but was contrary to
the code of ethics of the multi-national. After initially accepting the gifts the project
managers felt compelled to report it to their superiors. There was a huge storm from
the superiors which threatened the entire program and the project managers were
instructed to return the “gifts” immediately.
Integrative Social Contracts Theory

According to the integrative social contracts’ theory, the ethical standards a
company should try to uphold are governed by both universal and relative
considerations. This usually is structured to include a limited number of universal
ethical principles that put ethical boundaries on actions and behaviour in all
situations and circumstances of local cultures, traditions, and values that further
prescribe what constitutes ethically permissible behaviour and what does not.
Prioritizing Ethical Standards

Integrative social contracts theory provides that “first order” universal ethical norms
always take precedence over “second order” local ethical norms when local norms
are more permissive.
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ETHICAL DILEMMA
This is a situation that, although offering potential benefits, is unethical. One of the
most common ethical dilemmas occurs when a company’s culture conflicts with an
employee’s personal ethics. Ethical dilemmas are very common. When a hiring
decision is to be made it is important for both sides to evaluate each other’s culture
to ascertain if the relationship is a good fit.
16
Rupal, E.. Business Ethics. https://www.slideshare.net/rupaleeslideshare/ethics-12132965 (Accessed
June 3, 2020)
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3, 2020)
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ETHICS BASED ON INDIVIDUALS
Individual have equal political rights, deserve to be treated fairly, have the right to
live as they want, as long as they do not infringe on the rights of others. This includes
the right to live in ways that may be harmful or injurious to themselves. A good
society is one that treats individuals fairly and protects their rights. This requires
efficient, non-corrupt government and business as well as a clean, non-toxic
environment.
ETHICS BASED ON RELATIONSHIPS, FAMILY AND COMMUNITY

Communities and families that are effective are built on good relationships.
Business and professional success is based on good relationships. Good
relationships require adherence to values such as loyalty, honour, friendship,
humility and self-sacrifice as well as a clean, non-toxic operational environment.
An effective professional has the qualities that facilitate stable, long-lasting
relationships, families, and communities. These are building blocks of professional
success.
FACTORS THAT AFFECT EMPLOYEES ETHICS: INDIVIDUAL FACTORS &

ETHICAL DECISION MAKING
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Moral Development
Moral Development is a measure of independence from external influences. Levels
of Individual Moral Development include
• Pre-conventional level
• Conventional level
• Principled level
In ethical scenarios an individual’s moral development interacts with:
• Individual characteristics
• The organization’s structural design
• The organization’s culture
• The intensity of the ethical dilemma
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THEORIES ON MORAL DEVELOPMENT 19
Two psychologists Jean Piaget and Lawrence Kohlberg are credited with much of
current thinking on moral development in individuals from when they are children.
The summary of Piaget findings are that children younger than 10- or 11-years
regard rules as fixed and absolute. They believe that rules are handed down by adults
or by God and cannot be changed, this is known as the pre-conventional level. The
view of older children (13-14 years) is more relativistic. He or she understands that
it is permissible to change rules if everyone agrees. Rules are not sacred and absolute
but are devices which humans use to get along cooperatively.
Younger children base their moral judgments more on consequences, whereas older
children base their judgments on intentions. When, for example, the young child
hears about one boy who broke 15 cups trying to help his mother and another boy
who broke only one cup trying to steal cookies, the young child thinks that the first
boy did worse. The child primarily considers the amount of damage (the
consequences) whereas the older child is more likely to judge wrongness in terms
of the motives underlying the act. Piaget found a series of changes that occur
between the ages of 10 and 12, just when the child begins to enter the general stage
of formal operations.
Intellectual development, however, continue to develop at least until age 16.
Accordingly, one might expect thinking about moral issues to continue to develop
throughout adolescence. Kohlberg a disciple of Piaget, therefore interviewed both
children and adolescents about moral dilemmas, and he did find stages that go well
beyond Piaget's three stages. He uncovered six stages, only the first three of which
share many features with Piaget's stages.
Kohlberg based his studies on an experiment called Heinz’s Dilemma20. Heinz is
the husband of a woman near death from a special kind of cancer. The only drug
that the doctors think might save her is one that has been recently discovered by a
druggist in the same town. The druggist’s price is ten times the cost of development
of the drug. Heinz, could only raise half of the price and told the druggist that his
wife was dying and asked him to sell it cheaper or let him pay later. But the druggist
refused. So Heinz broke into the man's store to steal the drug-for his wife. The
question Kohlberg asked his subjects is, should Heinz have done that?
Kohlberg interest is not whether the subject says "yes" or "no" to this dilemma but
the reasoning behind the answer. A series of follow up questions are also asked the
19
W.C. Crain. (1985). Theories of Development. Prentice-Hall. pp. 118-136.
https://www.cs.umb.edu/~hdeblois/285L/Kohlberg'sMoralStages.htm. (Accessed Online on June 23rd
2020)
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2020)
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subject including if Heinz had a right to steal the drug, if he was violating the
druggist's rights, and what sentence the judge should give him once he was caught.
Once again, the main concern is with the reasoning behind the answers. The
interview then goes on to give more dilemmas in order to get a good sampling of a
subject's moral thinking.
Once Kohlberg had classified the various responses into stages, he wanted to know
whether his classification was reliable. In particular, he. wanted to know if others
would score the protocols in the same way. Other judges independently scored a
sample of responses, and he calculated the degree to which all raters agreed. This
procedure is called interrater reliability. Kohlberg found these agreements to be
high, as he has in his subsequent work, but whenever investigators use Kohlberg's
interview, they also should check for interrater reliability before scoring the entire
sample.
Kohlberg's Six Stages21

Level 1. Preconventional Morality
Stage 1. Obedience and Punishment Orientation. Kohlberg's stage 1 is similar to
Piaget's first stage of moral thought. The child assumes that powerful authorities
hand down a fixed set of rules which he or she must unquestioningly obey. To the
Heinz dilemma, the child typically says that Heinz was wrong to steal the drug
because "It's against the law," or "It's bad to steal," as if this were all there were to
it. When asked to elaborate, the child usually responds in terms of the consequences
involved, explaining that stealing is bad "because you'll get punished".
Although the vast majority of children at stage 1 oppose Heinz’s theft, it is still
possible for a child to support the action and still employ stage 1 reasoning. For
example, a child might say, "Heinz can steal it because he asked first and it's not
like he stole something big; he won't get punished". Even though the child agrees
with Heinz’s action, the reasoning is still stage 1; the concern is with what
authorities permit and punish.
Kohlberg calls stage 1 thinking "preconventional" because children do not yet speak
as members of society. Instead, they see morality as something external to
themselves, as that which the big people say they must do.
21
https://www.cs.umb.edu/~hdeblois/285L/Kohlberg'sMoralStages.htm. (Accessed Online on June 23rd 2020)
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Stage 2. Individualism and Exchange. At this stage children recognize that there
is not just one right view that is handed down by the authorities. Different
individuals have different viewpoints. "Heinz," they might point out, "might think
it is right to take the drug, the druggist would not." Since everything is relative, each
person is free to pursue his or her individual interests. One boy said that Heinz might
steal the drug if he wanted his wife to live, but that he doesn't have to if he wants to
marry someone younger and better-looking. Another boy said Heinz might steal it
because maybe they had children and he might need someone at home to look after
them. But maybe he shouldn't steal it because they might put him in prison for more
years than he could stand.
What is right for Heinz, then, is what meets his own self-interests.
Children at both stages 1 and 2 talk about punishment. However, they perceive it
differently. At stage 1 punishment is tied up in the child's mind with wrongness;
punishment "proves" that disobedience is wrong. At stage 2, in contrast, punishment
is simply a risk that one naturally wants to avoid.
Although stage 2 respondents sometimes sound amoral, they do have some sense of
right action. This is a notion of fair exchange or fair deals. The philosophy is one of
returning favours--"If you scratch my back, I'll scratch yours." To the Heinz story,
subjects often say that Heinz was right to steal the drug because the druggist was
unwilling to make a fair deal; he was "trying to rip Heinz off," Or they might say
that he should steal for his wife "because she might return the favour some day".
Respondents at stage 2 are still said to reason at the preconventional level because
they speak as isolated individuals rather than as members of society. They see
individuals exchanging favours, but there is still no identification with the values of
the family or community.
Level II. Conventional Morality

Stage 3. Good Interpersonal Relationships. At this stage children--who are by
now usually entering their teens--see morality as more than simple deals. They
believe that people should live up to the expectations of the family and community
and behave in "good" ways. Good behaviour means having good motives and
interpersonal feelings such as love, empathy, trust, and concern for others. Heinz,
they typically argue, was right to steal the drug because "He was a good man for
wanting to save her," and "His intentions were good, that of saving the life of
someone he loves." Even if Heinz doesn't love his wife, these subjects often say, he
should steal the drug because "I don't think any husband should sit back and watch
his wife die".
If Heinz’s motives were good, the druggist's were bad. The druggist, stage 3 subjects
emphasize, was "selfish," "greedy," and "only interested in himself, not another
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life." Sometimes the respondents become so angry with the druggist that they say
that he ought to be put in jail. A typical stage 3 response is that of Don, age 13:
It was really the druggist's fault, he was unfair, trying to overcharge and letting
someone die. Heinz loved his wife and wanted to save her. I think anyone would. I
don't think they would put him in jail. The judge would look at all sides, and see
that the druggist was charging too much. (Kohlberg, 1963, p. 25)
We see that Don defines the issue in terms of the actors' character traits and motives.
He talks about the loving husband, the unfair druggist, and the understanding judge.
His answer deserves the label "conventional "morality" because it assumes that the
attitude expressed would be shared by the entire community—"anyone" would be
right to do what Heinz did (Kohlberg, 1963, p. 25).
As mentioned earlier, there are similarities between Kohlberg's first three stages and
Piaget's two stages. In both sequences there is a shift from unquestioning obedience
to a relativistic outlook and to a concern for good motives. For Kohlberg, however,
these shifts occur in three stages rather than two.
Stage 4. Maintaining the Social Order. Stage 3 reasoning works best in two-
person relationships with family members or close friends, where one can make a
real effort to get to know the other's feelings and needs and try to help. At stage 4,
in contrast, the respondent becomes more broadly concerned with society as a
whole. Now the emphasis is on obeying laws, respecting authority, and performing
one's duties so that the social order is maintained. In response to the Heinz story,
many subjects say they understand that Heinz's motives were good, but they cannot
condone the theft. What would happen if we all started breaking the laws whenever
we felt we had a good reason? The result would be chaos; society couldn't function.
As one subject explained,
Because stage 4, subjects make moral decisions from the perspective of society as
a whole, they think from a full-fledged member-of-society perspective (Colby and
Kohlberg, 1983, p. 27).
You will recall that stage 1 children also generally oppose stealing because it breaks
the law. Superficially, stage 1 and stage 4 subjects are giving the same response, so
we see here why Kohlberg insists that we must probe into the reasoning behind the
overt response. Stage 1 children say, "It's wrong to steal" and "It's against the law,"
but they cannot elaborate any further, except to say that stealing can get a person
jailed. Stage 4 respondents, in contrast, have a conception of the function of laws
for society as a whole--a conception which far exceeds the grasp of the younger
child.
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Level III. Postconventional Morality (Principled Level)
Stage 5. Social Contract and Individual Rights. At stage 4, people want to keep
society functioning. However, a smoothly functioning society is not necessarily a
good one. A totalitarian society might be well-organized, but it is hardly the moral
ideal. At stage 5, people begin to ask, "What makes for a good society?" They begin
to think about society in a very theoretical way, stepping back from their own
society and considering the rights and values that a society ought to uphold. They
then evaluate existing societies in terms of these prior considerations. They are said
to take a "prior-to-society" perspective.
Stage 5 respondents basically believe that a good society is best conceived as a
social contract into which people freely enter to work toward the benefit of all They
recognize that different social groups within a society will have different values, but
they believe that all rational people would agree on two points. First they would all
want certain basic rights, such as liberty and life, to be protected Second, they would
want some democratic procedures for changing unfair law and for improving
society.
In response to the Heinz dilemma, stage 5 respondents make it clear that they do not
generally favour breaking laws; laws are social contracts that we agree to uphold
until we can change them by democratic means. Nevertheless, the wife’s right to
live is a moral right that must be protected. Thus, stage 5 respondent sometimes
defend Heinz’s theft in strong language:
It is the husband's duty to save his wife. The fact that her life is in danger transcends
every other standard you might use to judge his action. Life is more important than
property.
This young man went on to say that "from a moral standpoint" Heinz should save
the life of even a stranger, since to be consistent, the value of a life means any life.
When asked if the judge should punish Heinz, he replied:
Usually the moral and legal standpoints coincide. Here they conflict. The judge
should weight the moral standpoint more heavily but preserve the legal law in
punishing Heinz lightly.
Stage 5 subjects,- then, talk about "morality" and "rights" that take some priority
over particular laws. Kohlberg insists, however, that we do not judge people to be
at stage 5 merely from their verbal labels. We need to look at their social perspective
and mode of reasoning. At stage 4, too, subjects frequently talk about the "right to
life," but for them this right is legitimized by the authority of their social or religious
group (e.g., by the Bible). Presumably, if their group valued property over life, they
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would too. At stage 5, in contrast, people are making more of an independent effort
to think out what any society ought to value. They often reason, for example, that
property has little meaning without life. They are trying to determine logically what
a society ought to be like.
23
Stage 6: Universal Principles. Stage 5 respondents are working toward a
conception of the good society. They suggest that we need to (a) protect certain
individual rights and (b) settle disputes through democratic processes. However,
democratic processes alone do not always result in outcomes that we intuitively
sense are just. A majority, for example, may vote for a law that hinders a minority.
Thus, Kohlberg believes that there must be a higher stage--stage 6--which defines
the principles by which we achieve justice.
Kohlberg's conception of justice follows that of the philosophers Kant and Rawls,
as well as great moral leaders such as Gandhi and Martin Luther King. According
to these people, the principles of justice require us to treat the claims of all parties
in an impartial manner, respecting the basic dignity, of all people as individuals.
The principles of justice are therefore universal; they apply to all. Thus, for example,
we would not vote for a law that aids some people but hurts others. The principles
of justice guide us toward decisions based on an equal respect for all.
In actual practice, Kohlberg says, we can reach just decisions by looking at a
situation through one another's eyes. In the Heinz dilemma, this would mean that all
parties--the druggist, Heinz, and his wife--take the roles of the others. To do this in
an impartial manner, people can assume a "veil of ignorance", acting as if they do
not know which role they will eventually occupy. If the druggist did this, even he
would recognize that life must take priority over property; for he wouldn't want to
risk finding himself in the wife's shoes with property valued over life. Thus, they
would all agree that the wife must be saved--this would be the fair solution. Such a
solution, we must note, requires not only impartiality, but the principle that everyone
is given full and equal respect. If the wife were considered of less value than the
others, a just solution could not be reached.
Until recently, Kohlberg had been scoring some of his subjects at stage 6, but he has
temporarily stopped doing so,he and other researchers had not been finding subjects
who consistently reasoned at this stage. Also, Kohlberg has concluded that his
interview dilemmas are not useful for distinguishing between stage 5 and stage 6
thinking. He believes that stage 6 has a clearer and broader conception of universal
principles (which include justice as well as individual rights), but feels that his
interview fails to draw out this broader understanding. Consequently, he has
temporarily dropped stage 6 from his scoring manual, calling it a "theoretical stage"
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and scoring all postconventional responses as stage 5 .
Theoretically, one issue that distinguishes stage 5 from stage 6 is civil disobedience.
Stage 5 would be more hesitant to endorse civil disobedience because of its
commitment to the social contract and to changing laws through democratic
agreements. Only when an individual right is clearly at stake does violating the law
seem justified. At stage 6, in contrast, a commitment to justice makes the rationale
for civil disobedience stronger and broader. Martin Luther King, for example,
argued that laws are only valid insofar as they are grounded in justice, and that a
commitment to justice carries with it an obligation to disobey unjust laws. King also
recognized, of course, the general need for laws and democratic processes (stages 4
and 5), and he was therefore willing to accept the penalties for his actions.
Nevertheless, he believed that the higher principle of justice required civil
disobedience.24
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Summary
At stage 1 children think of what is right as that which authority says is right. Doing
the right thing is obeying authority and avoiding punishment. At stage 2, children
are no longer so impressed by any single authority; they see that there are different
sides to any issue. Since everything is relative, one is free to pursue one's own
interests, although it is often useful to make deals and exchange favors with others.
At stages 3 and 4, young people think as members of the conventional society with
its values, norms, and expectations. At stage 3, they emphasize being a good person,
which basically means having helpful motives toward people close to one At stage
4, the concern shifts toward obeying laws to maintain society as a whole.
At stages 5 and 6 people are less concerned with maintaining society for it own sake,
and more concerned with the principles and values that make for a good society. At
stage 5 they emphasize basic rights and the democratic processes that give everyone
a say, and at stage 6 they define the principles by which agreement will be most just.
THE THREE COMPONENTS OF THE ETHICAL TRIANGLE:

INDIVIDUAL ETHICS, LEADERSHIP ETHICS, AND GOVERNANCE
AND CONTROL
INDIVIDUAL ETHICS: CHARACTERISTICS AFFECTING ETHICAL
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DECISION MAKING26
• Values: Basic convictions about what is right or wrong on a broad range of
issues
• Stage of Moral Development – A measure of an individual’s independence
from outside influences
• Personality Variables
o Ego strength: a personality measure of the strength of a person’s
convictions
o Locus of Control: a personality attribute that measures the degree to
which people believe they control their own life.
▪ Internal locus: the belief that you control your destiny.
▪ External locus: the belief that what happens to you is due to
luck or chance
• 27
Gender: Gender has been found to be a significant indicator of ethical
behavioural intention, with women acting more ethically than men et al.,
However, it should be noted that some studies have found gender to have no
impact on ethical beliefs (Allmon, et. all). There is evidence that the ethical
decision-making process is different for men than women. Men rely on their
attitudes toward an action especially when deciding to perform a computing
act, whereas women rely on prevailing social norms. Differences between
men and women have also been found to depend on the situation. Dawson
(1997) found women to reach ethical judgments based on relationships rather
than rules and rights. Kreie and Cronan (1998) found different variables
significant for men and women, with women relying on the societal
environment, belief system, personal values, legal environment, moral
obligation, and the ethical issue itself, and men relying on the legal
environment, moral obligation, awareness of consequences, and the ethical
issue itself.
STRUCTURAL VARIABLES THAT AFFECT ETHICAL DECISION

MAKING
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Haines, R. & Leonard, L. Ethical Decion Making. Individual characteristics and ethical decision-making
in an IT context. www.emeraldinsight.com/0263-5577.htm. (accessed on June 3, 2020)
18
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Structural Variables are organizational characteristics, mechanisms and systems
that guide and influence individual ethics they include:
• An organization’s culture
• Ethical Behaviours of managers
• Formal Values & Compliance based ethics programs
• Performance Appraisal systems
• Reward allocation systems
Good structural design minimizes ambiguity and uncertainty and fosters ethical
behaviour.
ORGANISATIONAL CULTURE AND ETHICS

Organisational culture is the shared values, principles, traditions and ways of doing
things that influence the way members of an organisation act. It includes the shared
values, attitudes, beliefs that are relevant to and supportive of an organisation and
its goals as well as the characteristic set of values and ways of behaviour that
members of an organisation have as well as any common perception held by
members of an organisation29.
Organisational culture includes patterns of behaviour, values and beliefs. Patterns
of behaviour include ceremonial events, written and spoken comments and actual
behaviours by members of the organisation. Values and beliefs are the guiding
standards of an organisation, what should be practiced in contrast to what is actually
practiced.
Components of Organisational Culture

These include
• Signs and Symbols: The practices and actions that create and sustain an
organisations culture.
• Stories: The repeated tales and anecdotes that contribute to and reinforce an
organisation’s culture by illustrating and reinforcing important values
• Rites and Ceremonies: Traditional culture building events that symbolise
an organisation’s values and help to convert members to these values.
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( Mohanta, G.C.), Organisational Culture and Ethics.
https://www.slideshare.net/GaurangaMohanta1/organizational-culture-and-ethical-behaviour. (Accessed
June 3rd 2020)
19
The Purpose of Organisational Culture
This is to help integrate members so that they know how to work together and
collaborate effectively as well as to help the organisation adapt to its mission and
environment.
Effects of Organisational Culture

Organisational Culture determine
• How people Communicate
• How people work together
• How people relate
• Power and Status structures
• What is appropriate behaviour
• Guide to day to day behaviour
ETHICAL LEADERSHIP & MANAGEMENT

In order for an ethics program or culture to stand any chance of success those at
executive level must walk the talk. Management must set the tone by:
• Being ethical and honest at all times.
• Always being honest and transparent; not hiding or manipulating information
(admitting failure when it occurs and not being involved in any cover ups)
• Communicating shared ethical values to employees through symbols, stories,
and slogans.
• Rewarding employees who behave ethically and punish those who do not
• Protecting whistle-blowers who bring to light unethical behaviours or raise
ethical issues.
THE ROLE OF INTEGRITY IN INDIVIDUAL AND EFFECTIVE CORPORATE

LEADERSHIP
Integrity has been defined as the adherence to moral and ethical principles, the
soundness of moral principles. It has been said that integrity is the quality of being
whole, complete, entire and undiminished. People of integrity say what they mean,
and mean what they say, always following through on what they say. Individuals
that have integrity build trusting relationships with others. At the corporate level it
takes individuals of integrity to develop a consensus around shared values. As this
consensus builds, the corporation develops a culture of integrity. A culture of
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integrity creates a highly valued work environment; it impacts the quality of
corporate governance; and it provides a foundation for solid long-term financial
performance.
Introduction to integrity
There is a great deal of lip service paid to the role of integrity in leadership circles;
however, integrity means different things to different people and varies based upon
circumstances. With an individual of integrity, we talk about the character of the
person and our trust and belief in this individual. At the corporate level, we talk
about leaders that have created a corporate culture of integrity that provides
consistency, trust, and predictable results. Integrity, both in individuals as leaders
and in the corporate culture, is necessary for long term success and corporate
sustainability.
Individual Integrity
At the individual level, integrity is more than ethics; it is all about the character of
the individual. It is those characteristics of an individual that are consistently
considerate, compassionate, transparent, honest, and ethical. The characteristic of
trust is closely associated with integrity. While the definition may seem vague, we
characterize individuals with integrity as individuals that we can count on to do
consistently what is “right” and what is expected of them. They are reliable and
predictable in dealing with others and with issues, and they are defenders of what is
fair, just, and acceptable.
In the Turknett Leadership Character Model, developed by psychologist Dr. Robert
Turknett, integrity is the foundation of the model, and without integrity, no leader
can be successful. The Turknett Leadership Group notes that individuals of integrity
will not twist facts for personal advantage; they are willing to stand up for and
defend what is right; they will be careful to keep promises; and they can be counted
on to tell the truth. In their model, integrity is the foundation of leadership and it
involves a careful balance between respect and responsibility (Turknett, n.d.).
In his discussion of individual and corporate values, James H. Quigley, Global CEO
of Deloitte Touche Tohmatsu, emphasizes the critical role of trust in the professional
success of an individual. He states: “Simply put, those who bend rules are not
considered trustworthy, and without trust an individual’s value is severely
diminished. Without trust and confidence, markets do not function, and value is
destroyed.” (Quigley, 2007, p.9). Quigley goes on to note the critical importance of
integrity and character in the workplace. Lacking trust, competencies are
meaningless. Individuals who are not trustworthy will not be given opportunities or
responsibilities, and they will not be wanted as team members by clients or other
employees
(Quigley, 2007). Professionals who have worked with personnel who lacked
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integrity talk about the inability to count on individuals to do what they have said
they would do, environments where the focus has gone from customers to protecting
oneself, and where leaders are unwilling to live by the values that they publicly
espouse.
Corporate Culture of Integrity

At the corporate level, integrity refers to the culture, policies, and leadership
philosophy. A culture of integrity has to start at the top and be seen in the conduct
and activities of the executives. The leadership of the corporation must develop a
consensus around shared values. As Kouzes and Posner (2002, pp. 79-80) point out,
the development of shared values improves the work environment and productivity:
• It strengthens personal effectiveness, corporate loyalty, and ethical behaviour
• It fosters team work, corporate pride and consensus Corporations that have
these values outperform other firms by a wide margin in terms of revenue
growth, job creation, stock price and profitability (Kouzes and Posner, pp.80-
81).
It is important for an individual to search for an employer with similar values. This
match will be a key factor in one’s ability to grow professionally and gain
experience. As Quigley (2007) has pointed out, the culture of integrity may be far
more important than the starting salary in one’s quest for personal and professional
fulfilment. He notes that corporations with a culture of integrity:
• Offer support to employees through colleagues and processes in place;
consultation with other is seen as a strength rather than a weakness, and
• Supports a work-life balance as it reduces job stress, balances one’s
perspective, and contributes to job satisfaction (Quigley, 2007, p. 15).
When we have “trust” in our dealings with a corporation it is usually because the
leadership of the company has created a culture of integrity. We believe that our
relationship with the corporation will be predictable, reliable, and consistent in
meeting our needs and requirements. The corporation has a leadership and
governance system that successfully identifies and manages risk so that corporate
activities can be transparent and predictable/reliable. It also means that if things are
not going well, information will be shared so that employees can understand the
situation and have the opportunity to contribute to the solution.
Covey Link Worldwide (2006) speaks of the importance of trust because trust
always affects the outcomes in terms of speed and cost. If there is a lack of trust, the
speed on the transaction will go down and the cost will go up. In short, trust has a
favourable impact on the economics of the relationship; trust pays a dividend in
terms of speed and reduced cost.
Establishing a culture of integrity engenders trust and increases efficiency.
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In contrast, the characteristics of low integrity organizations are:
• High employee turnover rates,
• Lack of trust (suspicion and paranoia), honesty, and transparency,
• Broken promises,
• Disrespect - officers disparage colleagues or a category of employees,
• Buck-passing - others are blamed for problems,
• Unexpected financial events occur,
• Reluctance to put policies and procedures into written format,
• Exaggeration of leadership accomplishments, and
• Limited board access to information, officers, and employees.
High integrity organizations are characterized as organizations that are
collaborative, constructive, innovative, transparent, with high employee morale,
valued customer loyalty, and strong partnerships. They build teams and create value.
Studies have shown that corporations with a culture of integrity tend to have
governance systems with higher external ratings and higher quality of earnings.
They tend to be good places to work, competitive in their markets, and provide
higher, more predictable returns to investors Integrity and Performance. The
integrity hypothesis assumes that individual leaders of integrity can create a
consensus around a culture of integrity within a corporation. This culture of
integrity, in turn, will create a highly-valued work environment; the corporation will
operate with its focus on the long-run good of its customers, employees and
investors; and, as a result of this focus, the corporation will excel in terms of
financial performance when compared to its peers.
Integrity: Driver of Individual & Corporate Success

Integrity is a prerequisite to personal success and for developing leadership skills.
Individuals that have integrity build trust in their relations with others; they become
valued as friends, colleagues, mentors, partners, consultants, supervisors and
professionals. They are respected and counted on to do what is right. They are able
to balance respect and responsibility, and they are able to share their values with
others.
At the corporate level, it takes individuals of integrity to develop a consensus around
shared values. They must be able to discuss these values openly as well as live the
values they espouse. As this consensus builds, the corporation develops a culture of
integrity. This culture impacts the interpersonal relationships within the company
and creates a highly valued work environment. Employees are motivated and
creative, take pride in their work, and enjoy their co-workers. The culture of
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integrity also impacts the actions and policies of the leadership team and the quality
of the corporate governance system.
In a great place to work, turnover declines, employees have high morale, and
productivity rises. As the culture of integrity permeates the relationships with
customers, vendors, and suppliers, trust paves the way for transaction time and cost
to diminish and for partnerships to develop. The corporate boards are able to give
value and direction to executive officers, thereby assuring that the culture of
integrity spans all stakeholders’ interest.
Corporations with a culture of integrity tend to be leaders in their industries; they
tend to outperform other firms and turn in solid long-term financial performance.
They are good firms to work for, to work with, and to own.
Moral Management30
This includes how managers act and communicate as role models. Managers brings
specific set of values to the game based on personal needs, moral development,
family influence, religious background, cultural background.
There are three types of moral managers
• Immoral manager: Actively opposes ethical behaviour in business, wilfully
ignores ethical principles in making decisions, views legal standards as
barriers to overcome, pursues own self-interests, is an example of capitalistic
greed, ignores interests of others, focuses only on bottom line or
accomplishing targets, will trample on others to avoid being trampled upon.
• Moral manager: Is dedicated to high standards of ethical behaviour in own
actions, and how the company’s business is to be conducted. A moral
manager considers it important to be a steward of ethical behaviour. They
demonstrate ethical leadership and pursues business success within the
confines of both the letter and spirit of laws and has a habit of operating well
above what laws require.
• Amoral manager:
• Characteristics of an Intentionally Amoral Manager
• Believes business and ethics should mix since different rules apply to
business and other realms of life
• Does not factor ethical considerations into own actions since business
activity lies outside sphere of moral judgment
30
. Rupal, E.. Business Ethics. https://www.slideshare.net/rupaleeslideshare/ethics-12132965 (Accessed
June 3, 2020)
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• Views ethics as inappropriate for the tough, competitive business
world
• Concept of right and wrong is legal i.e. what can we get away with
without running foul of the law
• Characteristics of an Unintentionally Amoral Manager
• Is blind to or casual about the ethics of decision-making and business
actions
• Displays a lack of concern regarding whether ethics applies to
company actions
• Sees self as well-intentioned or personally ethical
• Typical beliefs
o Will do what is necessary to comply with laws and regulations
o Government provides legal framework stating what society
will put up with
o if it is not illegal, it is allowed
LEADER – FOLLOWER RELATIONSHIP AND (UN)ETHICAL

BEHAVIOUR 31
Being ethical is about playing fair, thinking about welfare of others and thinking
about consequences of one’s actions. However, even if one grows up with a strong
sense for good or bad, the bad behaviour of others can undermine his ethical sense
as well. Ethical leaders think about long-term consequences, drawbacks and benefits
of their decisions. For the sake of being true to their own values and beliefs, they
are prepared to compete in a different battle on the market, where the imperative is:
Do what is right.
Leaders serve as role models for their followers and demonstrate the behavioural
boundaries set within an organization. The appropriate and desired behaviour is
enhanced through culture and socialization process of the newcomers. Employees
learn about values from watching leaders in action. The more the leader “walks the
talk”, by translating internalized values into action, the higher level of trust and
respect he generates from followers. When leaders are prepared to make personal
sacrifices for followers or the company in general for the sake of acting in
accordance with their values, the employees are more willing to do the same.
31
Mihelic, K. K., Lipicnik, B., & Tekavcic, M. (2010). Ethical Leadership. International Journal of
Management & Information Systems (IJMIS), 14(5). https://doi.org/10.19030/ijmis.v14i5.11 (Accessed
Online 06/06/2020)
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As managers take the issue of ethical responsibility seriously, they immediately
become more sensitive to followers’ needs and problems of those who will be
affected, thereby becoming more able to discern intuitively the emerging conflicts
(Enderle, 1987). Good leaders are designated by an enhanced capacity to feel
morally obligated to a wide range of followers and this is not a skill, but knowledge
and world perspective (Ciulla, 2005). Ethical leadership brings favourable
consequences for followers and organization that are reflected in perceived leaders’
effectiveness, followers’ job satisfaction, increased dedication and problem
reporting (Brown et al., 2005).
With regard to leader-follower relationship ethics should be a process rather than a
one-time sporadic event. To be able to influence followers’ ethical behaviour,
leaders must communicate ethical standards and continually evaluate real examples
(Brown, 2007). This means that solely writing a code of ethics is not a sufficient
step towards implementation of ethical behaviour in organizations. Ethics should be
ingrained in each and every pore of organizational life. Ethical leaders are perceived
as people who do not tolerate ethical lapses, they rather discipline people for wrong
behaviour (L. K. Trevino, Brown, & Hartman, 2003). Trevino and her colleagues
interviewed senior executives and ethics officers in America and found that to be
perceived as an ethical leader one has to be honest, trustworthy, show credibility
and demonstrate integrity, needs to walk the ethical talk is courageous and strong
(L. K. Trevino et al., 2003).
Previous surveys suggested that traits such as integrity, credibility, honesty are also
associated with a perception of an effective leader (Bass & Stogdill, 1990). Based
on a philosophical foundation Marcic outlines five virtues that are crucial for a
leader-follower relationship: trustworthiness, unity (seeking unanimity in strategic
decisions), respect and dignity (as a basis for true empowerment), justice, service
(being servant to employees and customers) and humility (Marcic, 1997).
Rubin, Dierdorff and Brown examined the consequences of ethical leadership in
form of promotion on a sample of ninety-six managers and found, that ethical
leaders were increasingly likely to be rated (by their superior) as exhibiting potential
for senior leadership positions. Surprisingly though, leaders who demonstrated
increased ethical leadership were no more likely to be viewed as promotable in the
short-run in comparison with those who displayed less ethical behaviour (Rubin,
Dierdorff, & Brown, 2010).
The possibilities to behave unethically in an organization are limitless and
unfortunately, this potential is too often realized. Why do ethics matter? Ethical
companies can recruit candidates more efficiently, choosing those recruits that will
fit the existing organizational values. Namely, people usually want to work for a
high-quality organization with excellent reputation. Consumers want to deal with a
reputable company and business partners search for renowned companies as only
with such companies it is possible to foster trust based relationships (Bazerman,
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2008). Why do people (leaders and followers) in organizations not behave as
ethically as they should? According to young managers because they are pressured
to comply with four powerful organizational commandments: performance is what
counts in the end; by all means show that you are loyal and a team-player; do not
break the law; do not over-invest in ethical behaviour. These rules are hardly
sufficient to create and ethical organization. What is even more interesting is that
only a minority of young managers believes that ethics pays in terms of career
advancement (J. L. Badaracco & Webb, 1995).
Gentile interviewed managers in their early career trying to find out what impedes
people to stay silent when encountered with an ethical issue. She found there to be
four classic rationalizations for doing nothing. The first is the excuse that” it’s
standard practice”, everyone in the companies does this on a daily basis. The second
is that and individual attempts to find an apology in the phrase “it’s not a big deal”.
This is a common argument we can hear among co-workers particularly when they
are under time pressure. Third statement is “it’s not my responsibility”. One just
might be tempted to speak his mind, but as he does not have the authority
(particularly if he is a younger employee) and it is not his responsibility, he remains
quiet. The last statement refers to “I want to be loyal”. On many occasions people
feel there is a conflict between doing what is right and being loyal to the leader and
co-workers, which can be an ethical dilemma as well (Gentile, 2010). Badaracco
and Webb performed a series of in-depth interviews of recent Harvard MBA
graduates to find out how young managers perceive, define and resolve ethical
issues. Analysis revealed that managers received explicit instructions from above to
do things that they felt were unethical. They even felt strong organizational pressure.
Next, they felt that codes of conducts, ethics programmes provided little help and
even believed that the respective company was out-of-touch on ethical issues (either
due to busyness or deliberate avoidance of responsibility). Therefore, young
managers used personal values and reflection to resolve the ethical dilemmas and
did not rely on corporate credo (J. L. Badaracco & Webb, 1995).
For majority of employees, speaking up about an ethical issue is more difficult than
disagreeing in starting a conflict. That is why it is the leader’s job to foster an ethical
climate that enables sincere and open communication and culture that promotes and
rewards ethical behaviour. Of the values that make up an organization’s culture,
those referring to ethics are the most important. Leaders should shape ethical values
primarily through ethical (value-
PERSONALITY CHARACTERISTICS OF ETHICAL LEADERS 32
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Traits
Leader’s character influences his ethical performance, but solely poor character
does not fully explain ethical lapses in corporations. However, it is true, that a strong
character plays an important role in effective self-leadership and in the process of
leading others. Leaders therefore must rely on their inner voice, inner compass that
points them in the ethical direction (Brown, 2007). In his book, Covey addresses the
issue of ethical leadership with the term “Character ethics”, that he understands not
as of individual character, but of “principles that govern human effectiveness” being
self-validating natural laws (Covey, 2004, p. 32). The mode in which ethical
standards and consequently conduct are neglected or applied is a function of
individual characteristics. Covey’s view on effective leadership with a strong ethical
component is described in the following sentence: “To value oneself and, at the
same time, subordinate oneself to higher purposes and principles is the paradoxical
essence of the highest humanity and the foundation of effective leadership (Covey,
2004, p. 19).
Jones asserts that ethical conduct is a result of one’s personal dispositions, his
character and not a result of learning experience. He asserts that ethical leader is an
ascetic construct, whereby ascetic describes a self-controlled, purposeful person
who is mindful with regard to consequences (Jones, 1995). He continues that “the
ascetic person lives from within. He or she is a person who regards life as the
occasion for commitment to ends higher than one’s own immediate happiness and
well-being (Jones, 1995, p. 869). He believes that being ethical is a personal quality
tied to characteristic habits, therefore training programs emphasizing self-evident
moral principles might not be as effective as we wish. It is assumed that consistently
ethical behaviour is the result of the process of socialization infinitely more
thoroughly than any organizational training program.
The criteria relevant for judging ethical behaviour of a leader include individual
values, conscious intentions, freedom of choice, stage of moral development, types
of influence used, and use of ethical as well as unethical behaviour (G. Yukl, 2006).
Some of the characteristic behaviours of ethical and unethical leaders are shown in
the table below.
Table 1: Ethical and unethical The Unethical Leader
leadership The Ethical Leader
Is humble Is arrogant and self-serving
Is concerned for the greater good Excessively promotes self-interest
Is honest and straightforward Practices deception
Fulfils commitments Breaches agreements
Strives for fairness Deals unfairly
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Takes responsibility Shifts blame to others
Shows respect for each individual Diminishes others’ dignity
Encourages and develops others Neglects follower development
Serves others Withholds help and support
Shows courage to stand up for
Values
Ethical values in an organizational setting are emphasized and strengthened
primarily through values-based leadership, that can be defined as a relationship
between leaders and co-workers, based on shared, internalized values, that are acted
upon by the leader (Daft, 2007). Values are general principles that guide action.
Values are not actions, they are codes which underlie the sanctions or punishments
for some choices of behaviour and rewards for other. Throughout history values
have sparkled interest of many researchers in various sciences. With staggering
growth of companies, management researchers became interested in this topic as
well. They came to realization that values have a profound effect on a leader’s
performance. According to Dolan et al (2006), ethical moral values refer to forms
of conduct that one has to live by in order to reach desired outcomes in the form of
final values. The word “moral” derives from the Latin expression “mores” which
means customs. In the table below are examples of different types of values that can
be attributed to leaders.
Table 2: Examples of final (personal and Happiness, health, salvation, family, personal
ethical-social) and instrumental values success, recognition, status, material goods,
(ethical-moral and values of competition) friendship, success at work, love.
Personal values:
What are the most important things in your
life?
Ethical-social values: Peace, planet ecology, social justice
What do you want to do for the world?
Ethical-moral values: Honesty, sincerity, responsibility, loyalty,
How do you think you should behave towards solidarity, mutual confidence, respect for
human rights
people that surround you?
Values of competition: Money, imagination, logic, beauty,
intelligence, positive thinking, flexibility,
What do you believe is necessary to compete
in life
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THE LEADER’S ROLE IN FOSTERING ETHICAL BEHAVIOUR IN
ORGANIZATIONS33
Leaders are the primary influence on ethical conduct in an organization (Hitt, 1990;
Jansen & Von Glinow, 1985) and are responsible for the norms and codes of conduct
that guide employees’ behaviour (Bennis & Nanus, 1985; Cyert, 1990). For Enderle
there are three ethical tasks a leader should normatively involve in: perceiving,
interpreting and creating reality; showing responsibility for the effects of one’s
decisions on the human beings concerned; being responsible for the implementation
of organizational goals (Enderle, 1987). Thomas believes that the motivation to be
ethical comes from one’s decision to live life in a certain way. If people opt to follow
your leadership, they tend to follow that same conduct that you exhibit (Thomas,
2001). The people namely watch the walk, they usually do not listen to the talk. In
real life one’s behaviour depends both on the situation one finds himself in, as well
as on standards of behaviour. Rost contends that the majority of people do not use
particular ethical frameworks to judge morality. Instead, they use personal and
cultural values, religious beliefs, ideology, organizational mores, family upbringing
practices, own behavioural experience and intuition (Rost, 1995). Gardner even
believes that it is more difficult for businesspeople to adhere to an ethical mind than
it is for other professionals, because in business one does not need a licence to
practice. It is relatively easy to wander off the correct path, as professional standards
are more a vocational option than part of the territory (Kannair, 2007). In business
world, an organization can voluntarily take on corporate social responsibility.
However, there are no penalties if it chooses not to.
Gellerman asserts that management/leadership in an organization holds the
responsibility for developing and sustaining conditions in which people are likely
to behave themselves, and for minimizing conditions in which they may be tempted
to misbehave (Gellerman, 1989). It seems that setting the tone at the top is a crucial
but not sufficient condition. Leadership must actively pursue that its quest for
greater efficiency and effectiveness does not inadvertently lead people into more
temptation than they can resist. Leaders who fail to provide ethical leadership and
develop procedures that facilitate ethical conduct share responsibility with those
who conceive, execute and benefit from corporate misdeeds (Paine, 1994). In the
table below, the criteria for evaluation of ethical and unethical leadership are
presented.
Table 3: Criteria for Ethical Leadership Unethical Leadership
evaluation of ethical
leadership Criterion
33
Online 06/06/2020)
30
Use of leader power and Serves followers and the Satisfies personal needs and
influence organization career objectives
Handling diverse interests of Attempts to balance and Favours coalition partners
multiple stakeholders integrate them who offer the most benefits
Development of a vision for Develops a vision based on Attempts to sell a personal
the organization follower input about their vision as the only way for the
needs, values and ideas organization to succeed
Integrity of leader behaviour Acts consistent with espoused Does what is expedient to
values attain personal objectives
Risk taking in leader Is willing to take personal Avoids necessary decisions or
decisions and actions risks and make necessary actions that involve personal
decisions risk to the leader
Communication of relevant Makes a complete and timely Uses deception and distortion
information operations disclosure of information to bias follower perceptions
about events, problems and about problems and progress
actions
Response to criticism and Encourages critical evaluation Discourages and suppresses
dissent by followers to find better solutions criticism or dissent
Development of follower Uses coaching, mentoring and Deemphasizes development
skills and self-confidence training to develop followers to keep followers weak and
dependent on the leader
In their essay Kouzes and Posner offer practical suggestions for being an ethical
leader, explaining that this emanates not so much from the head as it does from the
heart. Based on numerous interviews they conclude that love constitutes the soul of
ethical leadership. They also observe that when working at his personal best - that
means leading with love, with a feeling of warm personal attachment - leaders are
transforming their followers into leaders. Love in an organizational sense creates
the desire to see others grow and become better (Kouzes & Posner, 1992). Another
“recipe” to keep oneself on the path of ethics is to undergo a “positive periodic
inoculations”, which happen when one meets individuals or experiences situations
that force him to examine what he is doing or is trying to do to set a good example
for others (Kannair, 2007).
Basic rules of conduct that ethical leaders should follow in order to be considered
true leaders are outlined as follows (Freeman, Martin, Parmar, Cording, & Werhane,
2006):
• Leader principle: a leader is foremost a member of the company and its
spokesman, therefore his deeds must serve the purpose and benefits of the
corporation
• Constituents principle: leaders respect their co-workers and perceive them as
people who share common purpose. Their individuality and freedom is
accepted within the borders of ethical behaviour
31
Outcome principle: a leader connects values to stakeholder support as well as
societal legitimacy. Company mission, vision, values and goals (strategy and
tactics) are outlined within an understanding of ethical ideals
• Processes/skills principle: the leader is open to different opinions and ideas,
views and creates an atmosphere of dynamic and fruitful communication
• Situation/context principle: moral judgements are used to make ethical
decisions and when crossing the boundaries of different ideas. The ethical
leader knows the limits of the values and ethical principles they live.
• Ethics principle: a leader understands leadership and ethics as an integrated
process and frames actions and purposes in ethical terms.
Murphy and Enderle studied examples of ethical behaviour of four retired CEOs
who have written or spoken about ethics, using a narrative approach in order to
understand ethical behaviour and learn from it. After studying their behaviour,
interviews and writings about business and ethics they summarized the following
common themes. All four leaders demonstrate a strong commitment to perceive and
interpret reality within the context of honesty and openness. The latter traits are
particularly sought after in times of crisis when a leaders needs to maintain. Next,
leaders are able to create reality by continually reaffirming the ideals and beliefs of
their respective organizations. They are also particularly concerned for how their
decisions affect other people. Namely, they realize that managerial decisions have
an enormous impact on professional and private life of stakeholders (starting with
employees). From the perspective of personality, leaders possess an exceptionally
strong motivation and are emotionally strong, courageous, fair in treating all
employees, just and advocate temperance. Finally, leaders hold strong religious
values, as their moral commitment seems to be rooted in religious conviction that
brings a sense of unconditional obligation to others (Murphy & Enderle, 1995).
The determinants of highly ethical organization according to Pastin include: 1)
individuals who recognize and accept personal responsibility for the actions of the
organization; 2) a profound devotion to fairness with an emphasis on the other
person; 3) being comfortable with interacting with external groups; 4) tying all
activities in with an overall purpose (Pastin, 1986). CEOs have an important role to
play in implementing an organizational culture which Hitt refers to as clarifying
values (Hitt, 1990).
CONCLUDING REMARKS
Can a company be successful and competitive on the market and at the same time
ethical? Akers believes that market success and ethical conduct go hand in hand:
“Ethics and competitiveness are inseparable. We compete as a society. No society
32
anywhere will compete very long or successfully with people stabbing each other
in the back; with people trying to steal from each other; with everything requiring
notarized confirmation because you can’t trust the other fellow; with every little
squabble ending in litigation; and with government writing reams of regulatory
legislation, trying business hand and foot to keep it honest”(Akers, 1989, p. 69). It
pays to be ethical, is one of the key findings in a study by U.K. Institute of Business
Ethics. In a sample of 350 large U.K. “ethical” companies (where performance was
measured between 1997 and 2001) there was strong indicative evidence that
companies with codes of business ethics produced an above-average performance
when measured against a similar group without codes (Fulmer, 2004).
33
GOVERNANCE
34
Governance refers to the processes and structures that any organization uses to
direct and manage its general operations and program activities. Features of
Governance include but are not limited to:
• Strategic Planning – plans, objectives, program and policy coherence
• Leadership – championing the vision and demonstrating exemplary
behaviour with respect to values and ethics
• Design – organization structure that facilitates decision-making,
communication and meeting program objectives
• Stewardship – management accountability for oversight, assessment,
direction and appropriate resourcing and reporting on the values and ethics
program
• Risk Management – identifying, mitigating and managing values and ethics
risks
DISTINCTION BETWEEN VALUES-BASED AND COMPLIANCE–BASED

PROGRAMS
There is often confusion concerning how values-based ethics programs differ from
compliance. Often the programs are contrasted as rules versus values, as if rules and
values were mutually exclusive. To avoid confusion at the outset it may be
worthwhile to distinguish between compliance-based and values-based ethics
programs.
The purpose of compliance programs is to prevent unlawful conduct by ensuring
employees conform to externally imposed rules. Compliance-based programs may
introduce additional rules to ensure behaviour conforms to law and regulation. note
the following characteristics associated with compliance-based programs:
Development and communication of clear policies and guidelines to ensure
compliance;
• Education to ensure awareness of rules;
• Management direction and supervision;
• Monitoring of employee behaviour; and
• Sanctions for non-compliance.
34
Government of Canada. Treasury Board. Report of Governance Structures for Values and Ethics.
https://www.canada.ca/en/treasury-board-secretariat/services/values-ethics/code/report-governance-
structures-values-ethics.html?wbdisable=true (accessed online 06/06/2020)
34
All organizations are constrained by law and social expectations of ethical
behaviour. Compliance-based programs address the first constraint but not the latter.
Compliance-based programs govern compulsory behaviour, i.e. behaviour
determined by law. Values-based programs may choose to address compulsory
behaviour but their main focus is on discretionary behaviour. Values oriented ethics
programs are built on a foundation of pre-existing organizational functions, which
ensure compliance. A values-based program, as well as addressing discretionary
behaviour, encourages an independent critique of the decision process. In
supporting employees, values-based programs try to create a safe zone for
employees to discuss ethical issues and introduce ethical concerns into decision-
making.
Values-based programs are generally associated with:
• Development of higher standards of behaviour through shared values;
• Encouragement of dialogue to interpret shared values;
• Enabling responsible conduct by providing support for employees' ethical
aspirations; and
• Managerial responsibility for implementation (Weaver & Trevino, 1999).
Both compliance and values-based programs are associated with the following
outcomes:
• Reduced unethical behaviour;
• Ethical advice seeking;
• Awareness of ethical issues; and
• Perceptions of better decision-making (Weaver & Trevino, 1999).
Although Weaver and Trevino do not qualify their findings, it should be noted that
the four outcomes described above vary in accordance with an ethics program. For
example, in a compliance-based program all of the findings relate to compulsory
behaviour. In a values-based program all of the findings relate to both compulsory
and discretionary behaviour.
The following outcomes are only associated with a values-based program:
• Commitment to the organization;
• Employees more likely to believe that their integrity remains intact; and
• Willingness to deliver bad news (Weaver & Trevino, 1999).
Enhanced organizational commitment is correlated with increased organizational
effectiveness. Hence we would expect to find values-based ethics programs
associated with high performance organizations. A willingness to deliver bad news
35
suggests that disclosure of unethical conduct is more likely within a values-based
ethics program.
Drivers of Unethical Business Behaviour

The following have been shown to be drivers of unethical business behaviour
• An attitude or culture that rewards “profits at any or all costs”
• Overzealous pursuit of personal gain, wealth, and other self-interests
• A practice or culture of over aggressive income targets for sales and service
teams without establishing clear ethical boundaries and monitoring
• Undue pressure on line management and staff to meet or beat earnings targets
• A culture that places profits and performance ahead of ethical behaviour
Rationalizing Unethical Behaviour

Generally, people are known to rationalise or excuse unethical behaviour. Some
common excuses include
• “What I’m doing is not really illegal.
• This is what everyone is doing
• This is the way things have always been done
• My behaviours is God ordained or endorsed by the bible or Quran
• This is our tradition
• This is how my father or mentor does it
• This is the way we do it
• This is how I know it would work
• My behaviour is in everyone’s best interests.”
• “Nobody will ever find out what I’ve done.”•
• “The organization will protect me.”
Organizational Ethics Programs35
35
3, 2020)
36
Organisations can encourage ethical behaviour by establishing programs that
incorporate both values and compliance based approaches these include:
• Ethics Training: Seeks to develop ethical thinking and help people
understand the ethical aspects of decision making and to incorporate high
ethical standards into their daily behaviour. It includes spotlight questions
which can highlight the risk of public exposure of one’s actions for instance:
o “How would I feel if my family found out about my decision?”
o How would I feel if the local newspaper printed my decision?
• Whistle-blowing: Whistle-blowers are persons who expose individual or
organizational misdeeds in order to preserve ethical standards and protect
against wasteful, harmful, or illegal acts.
o In the past many whistle-blowers were fired for their actions.
o State and federal laws now offer some protection may encourage
ethical conduct. Many organisations now have formal policies to
protect whistle -blowers.
o Barriers to whistleblowing include:
▪ Strict chain of command
▪ Strong work group identities
▪ Ambiguous priorities
o Organizational methods for overcoming whistleblowing barriers:
▪ Ethics staff units who serve as ethics advocates
▪ Moral quality circles
▪ Rewards and Protection of Whistle- blowers
• Managers acting as positive role models may motivate others toward ethical
conduct
• Formal codes of ethics: A formal statement of values and ethical standards
sets standards for ethical conduct. Areas often covered by codes of ethics:–
o Integrity
o Responsibility
o Compliance with Legal Requirements
o Transparency
o Fairness and Fair play
o Policy on Gifts, Bribes and kickbacks
37
o Policy on “PR” and Political contributions
o Integrity of Books or Records
o Honest representation of facts
o Customer/supplier relationships
o Confidentiality of corporate information management
• Creating a culture or programs that:
o Respects human dignity
o Values employees, customers, and suppliers
o Keeps a safe workplace.
o Produces safe products and services.
o Respects basic rights
o Protects rights of employees, customers, and communities.
o Avoids anything that threatening safety, health, education, and living
standards.
o Establishes good corporate citizenship: Supporting social institutions,
including economic and educational systems. working with local
government and institutions to protect the environment.
Business Ethics vs Corporate Social Responsibility (CSR)36

Business Ethics is not the same as CSR. Business ethics is doing business
responsibly and ethically, CSR is an internal policy/department doing ethical things
to improve the society or environment the business operates in including
philanthropic social programmes.
Current Issues in Business Ethics37

Current ethical issues in business organisations include
• Ethical Investment • Use of company • Environmental
equipment for Abuse
• Whistleblowing
personal work
• Human Rights
• Lobbying and
• Conflicts of interest Responsibility
political donations
36
3, 2020)
37
3, 2020)
38
• Bribery balance • Facilitation
• Governance payments
• Corruption
• Money laundering • Advertising
• Employee Security
• Privacy • Harassment
• Gifts & Hospitality
• Procurement/ • Discrimination
• Executive Pay
Supply chain • Bullying
• Data Protection
• Child, Sweatshop • Aggressive Sales
• Work/home
labour practices
Classification of Business Ethics Problems

• Ethics of the economic system: Profit v Service
• Ethical issues in the boardroom: Values, Governance, Environment etc.
• Ethical issues facing managers: People issues, privacy, incentives etc.
• Ethical dilemmas of employees: Speaking up, bullying, work/home balance
etc.
Signs that a Business Problem Involves Ethics

• When the issue is not covered by the law
• It raises moral problems for you or any member of the team
• A correct and/or incorrect response is not clear
• If you are forced to consider where your obligations and duties lie.
Red Flags38: If you hear someone say any of these, something unethical may be
about to happen:
• “Well, maybe just this once.” • “Everyone does it.”
• “No one will ever know.” • “Don’t worry, it’s part of the
culture.”
• “It doesn’t matter how it gets
done as long as it gets done.” • “Shred that document.”
• “It sounds too good to be true.” • “We can hide it.”
38
3, 2020)
39
• “No one will get hurt.” • “This will destroy the
competition.”
• “What’s in it for me?”
• “We didn’t have this
• “There are already enough
conversation.”
competitors in this market.”
• “I don’t want to know.”
Ethical tests for a Business Decision

• Transparency: Do I mind others knowing what I have decided?
• Effect: Who does my decision affect or hurt?
• Fairness: Would my decision be considered fair by those affected
Current Pressures on Organisations to address Ethical Practices

• Corporate Governance
• Media & NGO Interest
• Public perceptions
• Growth of Socially
Responsible Investment
• Legislation
• Conspicuous Corporate
Misbehaviour
• Employee Concerns
• Security Breaches
• Product Recalls
• Regulatory Audits
40
Good Corporate Governance Standards of Conduct
It is important that all employees should know what standards of conduct are expected of
them. It is good practice for boards of directors to draw up codes of ethics or statements of
business practice and to publish them both internally and externally.
Conclusion39: Ethical Dilemmas are like landmines, like unexploded bombs, they must
be defused before they blow up in the faces of organisations. Organisations need to
establish programs and have clear guidelines to help mitigate and manage issues such as
• Company expectations for employee commitment
• Pressure from managers and co-workers
• Opportunities for unethical behaviour
• Internal pressure in the form of personal ambitions
• External forces such as family needs
Personal and business reputations, legal and financial standing are at risk for companies
and individuals facing ethical dilemmas.
i
Government of Canada, Values and Ethics of the Public Service
https://www.canada.ca/en/treasury-board-secretariat/services/values-ethics/code/what-is-ethics.html (Accessed on
June 02, 2020).
39
Rupal, E.. Business Ethics. https://www.slideshare.net/rupaleeslideshare/ethics-12132965 (Accessed June 3, 2020)
41

EPM-1183 Ethics, Code of Conduct & Professional Practice

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EPM-1183 Ethics, Code of Conduct & Professional Practice

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EPM-1183

ETHICS, CODE OF CONDUCT &

WHAT IS APPLIED ETHICS?

WHAT ARE VALUES AND ETHICS?

VARIETIES OF BUSINESS ETHICS

ETHICS AND CULTURE

Concept of Ethical Universalism

Concept of Ethical Relativism

Integrative Social Contracts Theory

Prioritizing Ethical Standards

ETHICS BASED ON RELATIONSHIPS, FAMILY AND COMMUNITY

FACTORS THAT AFFECT EMPLOYEES ETHICS: INDIVIDUAL FACTORS &

Kohlberg's Six Stages21

Level II. Conventional Morality

THE THREE COMPONENTS OF THE ETHICAL TRIANGLE:

INDIVIDUAL ETHICS: CHARACTERISTICS AFFECTING ETHICAL

STRUCTURAL VARIABLES THAT AFFECT ETHICAL DECISION

ORGANISATIONAL CULTURE AND ETHICS

Components of Organisational Culture

Effects of Organisational Culture

ETHICAL LEADERSHIP & MANAGEMENT

THE ROLE OF INTEGRITY IN INDIVIDUAL AND EFFECTIVE CORPORATE

Corporate Culture of Integrity

Integrity: Driver of Individual & Corporate Success

LEADER – FOLLOWER RELATIONSHIP AND (UN)ETHICAL

PERSONALITY CHARACTERISTICS OF ETHICAL LEADERS 32

DISTINCTION BETWEEN VALUES-BASED AND COMPLIANCE–BASED

Drivers of Unethical Business Behaviour

Rationalizing Unethical Behaviour

Organizational Ethics Programs35

Business Ethics vs Corporate Social Responsibility (CSR)36

Current Issues in Business Ethics37

Classification of Business Ethics Problems

Signs that a Business Problem Involves Ethics

Ethical tests for a Business Decision

Current Pressures on Organisations to address Ethical Practices

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