Principles of Management

Dyck / Neubert

Chapter 5
Ethics

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 Roadmap

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 Why Study Ethics?
• The emphasis on ethics is related to:
– The world is changing rapidly.
– Unethical decisions by managers are receiving more
attention.
– Managers are moral agents.

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 What Is Ethics?
• Ethics
– A set of principles or moral standards that
differentiate right from wrong.
• Management Ethics
– The study of moral standards and how they influence
managers’ actions.

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 Components of Management Ethics

1. Sources where a manager may get their moral

standards
2. The moral-point-of-view that a manager follows
3. The process a manager uses to make decisions
that are ethical
4. The influence of ethics on how managers
practice the four management functions

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 Figure 5.1: Overview of Chapter 5

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 Sources of Management Ethics
• Informal/Public
– Work experiences, peers, managers
– Ethical climate
• The informal shared perceptions of what are appropriate
practices and procedures
• Informal/private
– Examples set by the behavior of immediate family
members
• Family, friends, peer groups, society, and unspoken
universal human norms

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 Table 5.1: The Four
Types of Sources of Ethics

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 Levels of Personal Moral Development

• Pre-conventional
– What is rewarded and punished
• Self-interest: “What’s in it for me?”
• Conventional
– Social norms or external standards
• By others: “What is everyone else doing?”
• Post-conventional
– Universal principles established through conscience
and reason
• “What are timeless truths?”

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 Figure 5.2: Increasing
Levels of Moral Development

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 What Do You Think:
Does Religion Matter in Management Ethics?

• How does religious belief or lack of religious

belief influence behavior?
• Why are there differences between ethics of
people who belong to the same religion?
• Should the study of management ethics include
studying religious ethics?

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 Mainstream Management Ethics
• Moral-Point-of-View
– A framework of values used to develop internally
consistent and logically justified principles and
standards of right and wrong
• The key to studying managerial ethics is to think
about how a manager’s moral-point-of-view will
influence the manager’s behavior.

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 Table 5.2: Variations
of the Golden Rule

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 Mainstream Moral-Point-of-View
• Overarching Goals
– To maximize productivity, efficiency, profitability, and
competitiveness,
• General Rationale
– Consequentialist utilitarianism—actions that benefit
the greatest number are ethical
• Key Practices
– Effective management focuses the functions of
management on promoting measurable
improvements in productivity or profits

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 Moral Philosophies
• Consequentialist Theory
– Considers the consequences of an action in
determining what is ethical
• Utilitarianism
– Holds that ethical managers strive to produce “the
greatest good for the greatest number
• Egoism
– Utility of an option depends on the consequences for
the decision maker in deciding which option “benefits
me the most”

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 Mainstream Consequentialism
• Mainstream moral-point-of-view assumptions:
– What is “the greatest good.”
• Best “generic” measure of good is wealth or money
– How can wealth be maximized?
• Through individualism—the greatest good for the greatest
number (larger community) is achieved when organization
profits are maximized by rewarding people (shareholders) for
investing their resources into economic activity

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 What Do You Think?
Is Philanthropy Always Ethical?

• Is philanthropy more ethical if it does not benefit

the financial interests of the giver?
• Is philanthropy more ethical if comes from profits
that were generated in a socially responsible
manner?
• Do the “ends” (giving money to charity) justify
the “means” (whether the money was generated
in a socially responsible manner)?

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 Making Ethical Decisions
• Mainstream Process:
– Ethical awareness
• Recognize ethical issues that threaten or promote owner’s
wealth
– Ethical wisdom
• Gather information and develop alternatives consistent with
facts and policies
– Ethical judgment
• Make ethical choices that maximize legal profits
– Ethical courage
• Implement ethical decisions that change norms

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 Figure 5.3: A Possible
Stakeholder Map for Home Depot

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 Management in Practice:
How Do Managers Actually Make Ethical Decisions?

• General Rules-of-Thumb:
1. Performance is what really counts, so make your
numbers.
2. Be loyal and demonstrate that you are a team player.
3. Don’t break the law.
4. Don’t over-invest in ethical behavior

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 Mainstream Ethical Influences on the
Four Management Functions
• Planning: Goals and Responsibilities
– Seek to maximize organizational profits for owners
• Organizing: Structures and Systems
– Use the deterrent approach to reinforce ethical
behavior
• Create formal positions devoted to ethics
• Provide ethics training

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 Mainstream Ethical Influences on the
Four Management Functions (cont’d)
• Leading: Implicit and Explicit Action
– Demonstrate appropriate conduct through personal
actions and interpersonal relationships
• Controlling: Formal and Informal
– Control the ethical behavior of organizational
members
• Code of ethics
• Organizational culture

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 Multistream Moral-Point-of-View
• Overarching Goals
– To provide meaningful work
– To operate sustainably
– To be attentive to internal and external stakeholders
– To facilitate servant leadership

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 Multistream Moral-Point-of-View
• Virtue Theory
– Acting virtuously is the best “generic” way to improve
overall societal well-being.
• Key Virtues
– Serving others
– Fostering human development through work
– Nurturing community by including all stakeholders
– Balancing human and ecological concerns
(sustaincentrism)

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 Making Ethical Decisions
• Multistream Process:
– Ethical awareness
• Recognize issues related to overall well-being
– Ethical wisdom
• Consider alternatives by listening to others
– Ethical judgment
• Evaluate information and make ethical choices that nurture
overall well-being
– Ethical courage
• Implement ethical decisions, some will be courageous
experiments

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 Digging Deeper:
Two Additional Moral-Points-of-View

Moral-Rights View Asserts that managers should

of low-materialist, high- strive to maintain and protect the
individualist managers fundamental rights and privileges of
individuals.

Justice Approach Involves evaluating decisions and

of high-materialist, low– behaviors with regard to how
individualist managers benefits and harms are distributed
among individuals and groups.

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 Multistream Ethical Influences on the
Four Management Functions (cont’d)
• Planning: Goals and Responsibilities
– Focus on both financial and multiple stakeholder
needs to avoid teleopathy
• Organizing Structures and Systems
– Focus on promoting positive behavior rather than in
drawing attention to unethical behavior and
punishments

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Table 5.2: Variations of the Golden Rule

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 Corporate Social Responsibility
• Social Audit
– A systematic analysis of the effect that an
organization is having on its stakeholders and society
as a whole.
– Four primary areas covered:
• Assessing the organization’s economic responsibility – is it
profitable?
• Is it meeting all its legal responsibilities?
• Are its ethical responsibilities being met?
• Is it contributing to the broader community?

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 Multistream Ethical Influences on the
Four Management Functions (cont’d)
• Leading: Implicit and Explicit Action
– Model a servant leadership style that promotes other
forms of well-being as co-equal with financial well-
being
• Controlling: Formal and Informal
– Develop a code of ethics that:
• Includes expectations for stakeholders
• Is balanced in promoting positive behaviors and avoidance of
negative behaviors
• Is the result of an inclusive process

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 Multistream Ethical Influences on the
Four Management Functions (cont’d)
• Controlling: Formal and Informal (cont’d)
– Formalize positive behavior by including it in the
organization’s calendar.
– Use the informal control of an organizational culture
to reinforce:
• Integrity in all actions
• Commitment to satisfying customers
• Ethical development of employees
• Responsible leadership

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 Moral Points-of-View
and Ethical Decision-Making
Mainstream Multistream
Recognize as ethical (awareness) Recognize as ethical (awareness)
issues those which threaten or promote issues those which threaten or
owner’s wealth promote overall well-being

Gather information and develop Gather information and develop

alternatives that are consistent alternatives that are consistent with
with facts and policies listening to others

Evaluate information and make ethical Evaluate information and make

choices that maximizes ethical choices that nurture overall
profit within legal bounds well-being

Implement ethical decisions, Implement ethical decisions, which

which may require courageously often take the form of courageous
challenging norms experiments

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 Moral Points-of-View
and Management Functions
Mainstream Function Multistream
Focuses on organizational Focuses corporate social
specific responsibilities Plan responsibilities

Emphasizes deterrence Emphasizes promotion

of negative behavior in its Organize of positive behavior
structures and systems

Utilizes a transactional form Promotes and models

of leadership to evoke ethical Lead servant leadership
behavior

Stresses compliance to Stresses commitment to

formal and informal codes Control growth and empowerment
and rules of behavior

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