Ethics in

Management
 Outline

What is ethical behavior?

Factors That Determine Ethical and Unethical Behavior
Ethics in an International Context
Code of Ethics

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 What is ethical behavior?
Ethics
• Is defined as a Code of moral principles.
• Set standards of “good” and “bad” as opposed to
“right” and “wrong.”
• Ethics is defined as the study of how our decisions
affect other people.
Ethical behavior
• What is accepted as good and right in the context of
the governing moral code.

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 What is ethical behavior? (Continued...)
Ethics are defined in the context of an individual
• People have ethics while organizations do not.
Ethical Behavior
• Is in the eye of beholder.
• Generally refers to the behavior that conforms to the
generally accepted social norms.
Unethical Behavior
• Behavior that doesn’t conforms to the generally
accepted social norms.

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Managers and Ethical Behavior

• Managers—at all levels, in all areas, in all sizes, and in all kinds

of organizations—do face ethical issues and dilemmas.

• For instance, is it ethical for a sales representative to bribe a

purchasing agent as an inducement to buy?

• Would it make a difference if the bribe came out of the sales

rep’s commission?

• Is it ethical for someone to use a company car for private use?

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Figure: Factors that Determine Ethical and Unethical Behavior

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 Factors That Determine Ethical and Unethical
Behavior

1. Stage of Moral Development:

• At the first level, the preconventional level, a person’s choice between right

or wrong is based on personal consequences from outside sources, such as

physical punishment, reward, or exchange of favors.

• At the second level, the conventional level, ethical decisions rely on

maintaining expected standards and living up to the expectations of others.

• At the principled level, individuals define moral values apart from the

authority of the groups to which they belong or society in general.

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 Factors That Determine Ethical and Unethical
Behavior

2. Individual Characteristics:

• Two individual characteristics—values and personality—play a role in

determining whether a person behaves ethically.

• Each person comes to an organization with a relatively entrenched set of

personal values, which represent basic convictions about what is right and

wrong.

• Our values develop from a young age based on what we see and hear from

parents, teachers, friends, and others.

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 Factors That Determine Ethical and Unethical
Behavior
3. Structural Variables:

• An organization’s structural design can influence whether employees behave

ethically.

• Those structures that minimize ambiguity and uncertainty with formal rules and

regulations and those that continuously remind employees of what is ethical are

more likely to encourage ethical behavior.

• Other structural variables that influence ethical choices include goals,

performance appraisal systems, and reward allocation procedures.

• An organization’s performance appraisal system also can influence ethical

behavior

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 Factors That Determine Ethical and Unethical
Behavior
4. Organization’s Culture:

• An organization’s culture consists of the shared organizational values.

• Values reflect what the organization stands for and what it believes in as well

as create an environment that influences employee behavior ethically or

unethically.

• Culture most likely to encourage high ethical standards is one that’s high in

risk tolerance, control, and conflict tolerance.

• Employees are encouraged to be aggressive and innovative.

• Employees are aware that unethical practices will be discovered.

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 Factors That Determine Ethical and Unethical
Behavior
5. Issue Intensity:

• Six characteristics determine issue intensity or how important an ethical issue is to an

individual: (i) greatness of harm, (ii) consensus of wrong, (iii) probability of harm, (iv)

immediacy of consequences, (v) proximity to victim(s), and (vi) concentration of effect.

• Larger the number of people harmed, more agreement that the action is wrong.

• The greater the likelihood that the action will cause harm, the more immediately that

the consequences of the action will be felt, the closer the person feels to the victim(s),

• And, the more concentrated the effect of the action on the victim(s), the greater the

issue intensity or importance.

• When an ethical issue is important, employees are more likely to behave ethically.
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Issue Intensity

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 Ethics in an International Context
Are ethical standards universal?
•Although some common moral beliefs exist, social and cultural differences
between countries are important factors that determine ethical and unethical
behavior.

•It’s important for individual managers working in foreign cultures to

recognize the social, cultural, and political-legal influences on what is
appropriate and acceptable behavior.

•And international businesses must clarify their ethical guidelines so that

employees know what’s expected of them while working in a foreign
location, which adds another dimension to making ethical judgments.

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Ten Principles of the UN Global Compact

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 Code of Ethics
• Code of Ethics
• A code of ethics is a formal statement of an organization’s values and the ethical
rules it expects employees to follow, is a popular choice for reducing that
ambiguity.

• What should a code of ethics look like?

• It should be specific enough to show employees the spirit in which they’re
supposed to do things yet loose enough to allow for freedom of judgment.
• Some common moral beliefs exist, social and cultural differences between countries
are important factors that determine ethical and unethical behavior.

• A survey of companies’ codes of ethics found their content tended to

fall into three categories.

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Management 8/e - Chapter 3 18
End of Lecture

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Study Question 1: What is ethical behavior?

Utilitarian view of ethics — greatest good to the

greatest number of people.
Individualism view of ethics — primary
commitment is to one’s long-term self-interests.
Moral-rights view of ethics — respects and
protects the fundamental rights of all people.
Justice view of ethics — fair and impartial
treatment of people according to legal rules and
standards.

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Figure 3.1 Four views of ethical behavior.

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Study Question 1: What is ethical behavior?

Cultural issues in ethical behavior:

• Cultural relativism
• Ethical behavior is always determined by cultural context.
• Cultural universalism
• Behavior that is unacceptable in one’s home environment should not be acceptable
anywhere else.

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Figure 3.2 The extremes of cultural relativism
and ethical imperialism in international
business ethics.

Source: Developed from Thomas Donaldson, “Values in Tension: Ethics Away from Home,”
Harvard Business Review, vol. 74 (September-October 1996), pp. 48-62.

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Study Question 1: What is ethical behavior?

How international businesses can respect core or universal values:

Respect for human dignity
• Create culture that values employees, customers, and suppliers.
• Keep a safe workplace.
• Produce safe products and services.
Respect for basic rights
• Protect rights of employees, customers, and communities.
• Avoid anything that threatening safety, health, education, and living
standards.
Be good citizens
• Support social institutions, including economic and educational systems.
• Work with local government and institutions to protect environment.

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Study Question 2: How do ethical dilemmas
complicate the workplace?

An ethical dilemma occurs when choices, although

having potential for personal and/or organizational
benefit, may be considered unethical.
Ethical dilemmas include:
• Discrimination
• Sexual harassment
• Conflicts of interest
• Customer confidence
• Organizational resources

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Study Question 2: How do ethical dilemmas
complicate the workplace?

Ethical behavior can be rationalized by convincing

yourself that:
• Behavior is not really illegal.
• Behavior is really in everyone’s best interests.
• Nobody will ever find out.
• The organization will “protect” you.

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Study Question 2: How do ethical dilemmas
complicate the workplace?

Factors influencing ethical behavior include:

• The person
• Family influences, religious values, personal standards, and
personal needs.
• The organization
• Supervisory behavior, peer group norms and behavior, and policy
statements and written rules.
• The environment
• Government laws and regulations, societal norms and values, and
competitive climate in an industry.

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Figure 3.3 Factors influencing ethical
managerial behavior—the person,
organization, and environment.

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Study Question 3: How can high ethical standards
be maintained?

Ethics training:
• Structured programs that help participants
to understand ethical aspects of decision
making.
• Helps people incorporate high ethical
standards into daily life.
• Helps people deal with ethical issues under
pressure.

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Study Question 3: How can high ethical standards
be maintained?

Whistleblowers
• Expose misdeeds of others to:
• Preserve ethical standards

• Protect against wasteful, harmful, or illegal acts

Laws protecting whistleblowers vary

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Study Question 3: How can high ethical
standards be maintained?
Barriers to whistleblowing include:
• Strict chain of command
• Strong work group identities
• Ambiguous priorities
Organizational methods for overcoming whistleblowing barriers:
• Ethics staff units who serve as ethics advocates
• Moral quality circles

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Study Question 3: How can high ethical
standards be maintained?

Ethical role models:

• Top managers serve as ethical role models.
• All managers can influence the ethical behavior of people
who work for and with them.
• Excessive pressure can foster unethical behavior.
• Managers should be realistic in setting performance goals
for others.

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 Study Question 3: How can high ethical standards
be maintained?

Codes of ethics:
• Formal statement of an organization’s values and ethical
principles regarding how to behave in situations
susceptible to the creation of ethical dilemmas.
Areas often covered by codes of ethics:
• Bribes and kickbacks
• Political contributions
• Honesty of books or records
• Customer/supplier relationships
• Confidentiality of corporate information

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Study Question 4: What is corporate social
responsibility?
Corporate social responsibility:
• Looks at ethical issues on the organization level.
• Obligates organizations to act in ways that serve both its own interests and
the interests of society at large.

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Study Question 4: What is corporate social
responsibility?

Organizational stakeholders
• Those persons, groups, and other organizations directly affected by
the behavior of the organization and holding a stake in its
performance.
Typical organizational stakeholders
• Employees
• Customers
• Suppliers
• Owners
• Competitors
• Regulators
• Interest groups

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Figure 3.4 Multiple stakeholders in the
environment of an organization.

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Study Question 4: What is corporate social
responsibility?

Beliefs that guide socially responsible business

practices:
• People do their best with a balance of work and family
life.
• Organizations perform best in healthy communities.
• Organizations gain by respecting the natural
environment.
• Organizations must be managed and led for long-term
success.
• Organizations must protect their reputations.

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Study Question 4: What is corporate social
responsibility?

Perspectives on social responsibility:

• Classical view—
• Management’s only responsibility is to maximize profits.

• Socioeconomic view—
• Management must be concerned for the broader social welfare, not just profits.

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Study Question 4: What is corporate social
responsibility?
Arguments against
social responsibility:
• Reduced business profits
• Higher business costs
• Dilution of business
purpose
• Too much social power
for business
• Lack of public
accountability
Arguments in favor of
social responsibility:
• Adds long-run profits
• Improved public image
• Avoids more government
regulation
• Businesses have
resources and ethical
obligation

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Study Question 4: What is corporate social
responsibility?
Criteria for evaluating corporate social performance:
• Is the organization’s …
• Economic responsibility met?
• Legal responsibility met?
• Ethical responsibility met?
• Discretionary responsibility met?

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Figure 3.5 Criteria for evaluating corporate
social performance.

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Study Question 4: What is corporate social
responsibility?
Strategies for pursuing social responsibility:
• Obstructionist — meets economic responsibilities.
• Defensive — meets economic and legal responsibilities.
• Accommodative — meets economic, legal, and ethical responsibilities.
• Proactive — meets economic, legal, ethical, and discretionary
responsibilities.

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Figure 3.6 Four strategies of corporate social
responsibility—from obstructionist to
proactive behavior.

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Study Question 5: How do organizations and
governments work together in society?

How government influences organizations:

• Common areas of government regulation of business affairs:
• Occupational safety and health
• Fair labor practices
• Consumer protection
• Environmental protection

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Study Question 5: How do organizations and
governments work together in society?

How organizations influence governments:

• Personal contacts and networks
• Public relations campaigns
• Lobbying
• Political action committees
• Sometimes by illegal acts, such as bribery or illegal
financial contributions to political campaigns

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Figure 3.7 Centrality of ethics and social
responsibility in leadership and the
managerial role.

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Study Question 5: How do organizations and
governments work together in society?

Corporate governance:
• The oversight of the top management of an organization
by a board of directors.

Corporate governance involves:

• Hiring, firing, and compensating the CEO.
• Assessing strategy.
• Verifying financial records.

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