Personal and Organizational Ethics

Chapter 7

1
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved
 Chapter 8 Learning Outcomes

1. Understand the different levels at which business ethics

may be addressed.
2. Differentiate between consequence-based and
duty-based principles of ethics.
3. Enumerate and discuss principles of personal ethical
decision making and ethical tests for screening ethical
decisions.
4. Identify the factors affecting an organization’s moral
climate and provide examples.
5. Describe and explain actions, strategies, or “best
practices” to improve an organization’s ethical climate.

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 Chapter 8 Outline

 Levels at Which Ethics May Be Addressed

 Personal and Managerial Ethics
 Managing Organizational Ethics
 From Moral Decisions to Moral Organizations
 Summary
 Key Terms
 Discussion Questions

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 Introduction to Chapter 8

 This chapter focuses on the day-to-day ethical

issues that managers face

 Many managers have no training in business ethics

or ethical decision making

 Ethics is vital to business success

4
 Levels at Which Ethical Issues
May Be Addressed

Personal Situations faced in our personal

Level lives outside the work context

Organizational Workplace situations faced as

Level managers and employees

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 Levels at Which Ethical Issues
May Be Addressed
Situations where a manager or
Industry organization might influence
Level business ethics at the industry level

Local-to-global situations
Societal and confronted indirectly as a
Global Levels management team

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 Personal and Managerial Ethics

Conventional
Conventional approach
approach

Resolving
Resolving
Ethical
Ethical Principles
Principles approach
approach
Conflicts
Conflicts

Ethical
Ethical tests
tests approach
approach

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 Types of Ethical Principles

Teleological
Teleological Focus
Focus on
on the
the consequences
consequences or or
Theories
Theories results
results of
of the
the actions
actions they
they produce
produce

Deontological
Deontological Focus
Focus on
on duties
duties
Theories
Theories

Aretaic
Aretaic Focus
Focus on
on virtue
virtue
Theories
Theories
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 Principles Approach to Ethics

Major Principles of Ethics

 Utilitarianism  Care
 Rights  Virtue ethics
 Justice  Servant leadership
 Golden Rule

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 Principle of Utilitarianism

Utilitarianism focuses on acts that produce the

greatest ratio of good to evil for everyone

Strengths
 Forces thinking about the
general welfare and
stakeholders
 Allows personal decisions to fit
into the situation complexities
Weaknesses
 Ignores actions that may be
inherently wrong
 May come into conflict with
the idea of justice
 Difficult to formulate satisfactory
rules for decision making

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 Kant’s Categorical Imperative
Kant’s Categorical Imperative is a duty-based principle of ethics.
A sense of duty arises from reason
or rational nature.

Formulations

1. Act only on rules that you would be willing to see

everyone follow.
2. Act to treat humanity in every case as an end and
never as a means.
3. Every rational being is able to regard oneself as a maker
of universal law. We do not need an external authority
to determine the nature of the moral law.
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 Principle of Rights

Principle of Rights focuses on examining and possibly

protecting individual moral or legal rights

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 Principle of Rights

Figure 8-1 13
 Principle of Justice

Principle of justice involves considering what alternative

promotes fair treatment of people

Types of justice

Distributive
Compensatory
Procedural
Rawlsian

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 Ethical Due Process

Process Fairness

1. Have employees been given input into the decision

process?

2. Do employees believe the decisions were made and

implemented in an appropriate manner?

3. Do managers provide explanations when asked? Do

they treat others respectfully? Do they listen to
comments being made?

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 Rawls’s Principles of Justice

1. Each person has an equal right to the most basic

liberties compatible with similar liberties for others

2. Social and economic inequalities are arranged so that

they are both:
a) reasonably expected to be to everyone’s advantage
and
b) attached to positions and offices open to all

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 Ethic of Care and Virtue Ethics

 Principle of caring focuses on a person as a relational

(cooperative) and not as an individual
 Feminist theory

 Virtue ethics focuses on individuals becoming

imbued with virtues
 Aristotle and Plato

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 Servant Leadership

Servant leadership focuses on serving others

first, such as employees, customers, and community

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 Servant Leadership
Characteristics of Servant Leaders

 Listening Bridges
 Empathy Business Ethics
 Healing and
 Persuasion Leadership
 Awareness
 Foresight
 Conceptualization
 Commitment to the growth of
people
 Stewardship
 Building community
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 The Golden Rule

The Golden Rule focuses on the premise

that you should do unto others as
you would have them do unto you

The Golden Rule is…

1. accepted by most people

2. easy to understand
3. a win-win philosophy
4. a compass when you need direction

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 The Categorical Imperative
 The Conventionalist Ethic
 The Disclosure Rule
 The Golden Rule
 The Hedonistic Ethic
 The Intuition Ethic
 The Market Ethic
Figure 8-2
Ethical Principles
 The Means-Ends Ethic
 The Might-Equals-Right Ethic
 The Organization Ethic
 The Professional Ethic
 The Proportionality Principle
 The Revelation Ethic
 The Utilitarian Ethic
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 Reconciling Ethical Conflicts

Concerns
Concernsto
tobe
beAddressed
Addressedin
inEthical
EthicalConflicts
Conflicts

 Obligations
Obligations
 Ideals
Ideals
 Effects
Effects

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 Guidelines for Conflicting
Obligations, Ideals, and Effects

 When two or more moral obligations conflict,

choose the stronger one
 When two or more ideals conflict, or when ideals
conflict with obligations, honor the more important
one
 When effects are mixed, choose the action that
produces the greater good or less harm

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 Ethical Tests Approach

Test
Test of
of Common
Common Sense
Sense

Test
Test of
of One’s
One’s Best
Best Self
Self

Test
Test of
of Making
Making Something
Something Public
Public

Test
Test of
of Ventilation
Ventilation

Test
Test of
of the
the Purified
Purified Idea
Idea

Big
Big Four
Four (greed,
(greed, speed,
speed, laziness,
laziness, or
or haziness)
haziness)

Gag
Gag Test
Test 24
 Factors Affecting the
Morality of Managers
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Organization’s Moral Climate

Superiors
Superiors

Individual
Individual
One’s
One’sPersonal
Personal Policies
Policies
Situation
Situation

Peers
Peers

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Figure 8-4
 Factors Affecting the
Organization’s Moral Climate

1. Behavior of superiors
2. Behavior of one’s peers in the organization
3. Ethical practices of one’s industry or profession
4. Society’s moral climate
5. Formal organizational policy (or lack of one)
6. Personal financial need

Figure 8-5 26
 Pressures Exerted on Employees
by Superiors
Managers feel under pressure to compromise
personal standards to achieve company goals.

 Top management: 50 percent agreed

 Middle management: 65 percent agreed

 Lower management: 85 percent agreed

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 Questionable Organizational Climates

Questionable Behaviors of Superiors or Peers

 Unethical acts, behaviors or practices
 Acceptance or legality as a standard of behavior
 Bottom-line mentality, expectations of loyalty and conformity
 Absence of ethical leadership
 Objectives and evaluation systems that overemphasize profits
 Insensitivity toward how subordinates perceive pressure to
meet goals
 Inadequate formal ethics policies
 Amoral decision making

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Figure 8-6
 Improving the Ethical Climate
Board
Boardof
ofDirectors’
Directors’ Ethics
EthicsAudits
Auditsand
and
Oversight
Oversight Risk
RiskAssessments
Assessments
Ethics
EthicsPrograms
Programs
and
andOfficers
Officers
Effective
Effective
Communication
Communication
Realistic
Realistic Top
Top
Objectives
Objectives Management
Management
Leadership
Leadership Ethics
EthicsTraining
Training
Ethical Moral
Moral
EthicalDecision-
Decision-
Making
MakingProcesses
Processes Management
Management
Corporate
Corporate
Transparency
Transparency
Codes
Codesof
of
Conduct
Conduct Discipline
Disciplineof
of Whistle-Blowing
Whistle-Blowing
Violators
Violators Mechanisms
Mechanisms 29
Figure 8-7
 Pillars of Leadership
Ethical Leadership

Role
Role
Traits
Traits Modeling

Moral Manager
Moral Person

Modeling

Ethics
Ethics
Behaviors
Behaviors Communication
Communication

Decision
Decision Effective
EffectiveRewards
Rewards
Making
Making and Discipline
and Discipline

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 Ethical Leadership Characteristics
 Articulate and embody the purpose and values of the
organization
 Focus on organizational success rather than on personal ego
 Find the best people and develop them
 Create a living conversation about ethics, values, and value for
stakeholders
 Create mechanisms of dissent
 Take a charitable understanding of others’ values
 Make tough calls while being imaginative
 Know the limits of the values and ethical principles they live
 Frame actions in ethical terms
 Connect the basic value proposition to stakeholder support and
societal legitimacy
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 Effective Communication

 Candor

 Fidelity

 Confidentiality

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 Features of Ethics Programs

 Written standards of conduct

 Ethics training
 Mechanisms to seek ethics advice or information
 Methods for reporting misconduct anonymously
 Disciplinary measures for employees who violate
ethical standards
 Inclusion of ethical conduct in the evaluation of
employee performance

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 Key Elements for Ethics Programs

 Compliance standards
 High-level ethics personnel
 Avoidance of delegation of undue discretionary authority
 Effective communication
 Systems for monitoring, auditing, and reporting
 Enforcement
 Detecting offenses, preventing future offenses
 Keeping up with industry standards

Figure 8-8
Source: U.S. Sentencing Commission Guidelines 34
 Ethical Decision-Making Process

Figure 8-9
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 Ethics Check

1. Is it legal?
2. Is it balanced?
3. How will it make me feel about myself?

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 Texas Instruments Ethics Quick Test

1. Is the action legal?

2. Does it comply with our values?
3. If you do it, will you feel bad?
4. How will it look in the newspaper?
5. If you know it’s wrong, don’t do it.
6. If you’re not sure, ask.
7. Keep asking until you get an answer.
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 Sears’ Guidelines

1. Is it legal?
2. Is it within Sears’ shared beliefs and policies?
3. Is it right / fair / appropriate?
4. Would I want everyone to know about this?
5. How will I feel about myself?

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 Benefits of Ethics Codes

1. Legal protection for the company

2. Increased company pride and loyalty
3. Increased consumer / public goodwill
4. Improved loss prevention
5. Reduced bribery and kickbacks
6. Improved product quality
7. Increased productivity
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 Content of Codes of Conduct

 Employment practices
 Employee, client, and vendor information
 Public information / communications
 Conflicts of interest
 Relationships with vendors
 Environmental issues
 Ethical management practices
 Political involvement

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 How Codes of Conduct Influence Behavior

Codes of Conduct act as a…

1. Rule book 5. Shield

2. Signpost 6. Smoke detector
3. Mirror 7. Fire alarm
4. Magnifying glass 8. Club

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 Purposes of Ethics Training

1. Increase the manager’s sensitivity to ethical problems

2. Encourage critical evaluation of value priorities
3. Increase awareness of organizational realities
4. Increase awareness of societal realities
5. Improve understanding of the importance of public image
6. Examine the ethical facets of business decision making
7. Bring about a greater degree of fairness and honesty in the
workplace
8. Respond more completely to the organization’s social
responsibilities

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 Corporate Transparency

A quality, characteristic, or state

in which activities, processes,
Corporate
practices, and decisions that take
Transparency place in companies become open or
visible to the outside world.

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 Board of Director
Leadership and Oversight

The 2002 Sarbanes-Oxley Act

 Companies are required to protect whistle-blowers

without fear of retaliation

 It is a crime to alter, destroy, conceal, cover up, or

falsify documents to prevent its use in a federal
government lawsuit

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 From Moral Decisions to
Moral Organizations

Moral
Moral Decisions
Decisions

Moral
Moral Managers
Managers

Moral
Moral Organizations
Organizations

Figure 8-10 45
 Key Terms

 Aretaic theories  Moral rights

 Categorical imperative  Negative right
 Codes of conduct  Opacity
 Codes of ethics  Positive right
 Compensatory justice  Principle of justice
 Corporate transparency  Principle of rights
 Deontological theories  Principle of utilitarianism
 Distributive justice  Procedural justice
 Ethic of care  Rights
 Ethical due process  Risk assessments
 Ethical tests  Servant leadership
 Ethics audits  Teleological theories
 Ethics officer  Transparency
 Ethics programs  Utilitarianism
 Golden Rule  Virtue ethics
 Legal rights
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