+1(978)310-4246 credencewriters@gmail.com
  

MGT422
Discussion 3)
List the four drivers of engagement and briefly describe each one.
please use your own words.
Discussion 4)
Explain the elements of Due Care theory? (from Chapter 10)
+
Managing Business Ethics
Chapter 1
Treviño & Nelson – 5th Edition
+
Chapter 1 Overview
â– 
Financial Disaster of 2008
â– 
Moving Beyond Cynicism
â– 
Can Business Ethics Be Taught?
â– 
This Book is About Managing Ethics in Business
â– 
Ethics and the Law
â– 
Why be Ethical? Why Bother? Who Cares?
â– 
The Importance ofTrust
â– 
The Importance ofValues
â– 
How the Book Is Structured
+Financial Disaster 2008
3
Direct Causes
Shadow
Financial
Market
— Credit Default
Swaps
— Securitized
Mortgages (“slice
& dice”)
– – Derivatives
– – Hedge Funds
Subprime
M o rtg ag es
— “Liar” Loans
— No $ down, no
income verification
— Consumers bought
more than they could
afford
Regulatory Climate
— Glass-SteagallAct
repealed
— Debt regulations for
banks eased
— “Markets can selfregulate”
— Revolving door
between regulators and
companies
— “Government is the
problem”
Incentives
— Big rewards for
short-term thinking
for companies and
individuals
Bottom-line:
— Arrogance
— Greed
— Total recklessness
Contributing Factors
“Herd
Mentality”
– – Wall Street
– – Consumers
— “Real estate is
safe”
Investment
Banks
— Go public
— No “skin” in
the game
Lots of Cheap $$
— Fed (low
interest rates)
— Demand from
China and Middle
East
Rating Agencies
— Conflicts of
interest
–Didn’t understand what they
were rating
“Innovation”
— Math whiz kids
create complex
products
— No one really
understood what
these products
were
+
The Players
Rating Agencies
Went public and became shareholder owned; paid fees by companies they
were supposed to rate; took the investment banks’ advice on how to rate
securitized mortgages (AAA ratings while many were complete junk)
CEOs
Much of their compensation is driven by stock price – this focused them on
the short term; Also many did not understand the sophisticated financial
products their firms peddled
Financial Professionals
Paid huge salaries and bonuses for short-term results
Mortgage Originators
Relaxed lending standards and created sophisticated products consumers
did not understand
Regulators
“Asleep at the switch” — also looking for their next jobs (high-paying) in the
financial industry (which they are regulating)
Legislators
Lobbied and “paid” by the financial industry to relax regulations – “the
markets can self-regulate”
Investors
Punished companies that did not deliver huge returns
Home Owners
Bought more house than they could afford. Home values plummet and
mortgages are “under water” – home values sink and are worth less than
their mortgages
+
Financial Disaster Results
â–  Business failures or contractions
â–  Government bailouts
â–  Unemployment
â–  Consumer distress: foreclosures and bankruptcies
â–  Tattered reputations (corporations, industries, countries)
â–  Plummeting trust in government and institutions
+ Moving Beyond Cynicism
â– 
Edelman Trust Barometer (2009): Edelman’s study shows that
consumer trust in corporations has declined.
â–  More than half of respondents say they trust business
less than they did
a year ago
â– 
Worse in the U.S. The decrease is particularly acute in the United
States, where citizens have traditionally had higher opinions of
business than they do in Europe.
â– 
No decline in BRIC countries (Brazil, Russia, India, China). The only part
of the world where trust levels have not declined is in the developing
world—the so-called BRIC nations
â–  Business case fortrust:
â–  9 1 % of consumers purchase products from companies they trust
â– 
7 7 % of consumers refuse to purchase products from companies they
don’t trust. This study suggests that corporate reputation affects consumer
buying patterns, and companies risk harming their bottom line when they do not
act to protect their good name.
+ MBA Oath
As a business leader, I recognize my role in society.
M y purpose is to lead people and manage resources to create value that no single individual
can create alone.
â–  M y decisions affect the well-being of individuals inside and outside my enterprise, today and
tomorrow.
â– 
Therefore I promise:
â– 
â– 
â– 
â– 
â– 
â– 
â– 
I will manage my enterprise with loyalty and care, and will not advance my personal interests
at the expense of my enterprise or society.
I will understand and uphold, in letter and in spirit, the laws and contracts governing my
conduct and that of my enterprise.
I will refrain from corruption, unfair competition, or business practices harmful to society.
I will protect human rights and dignity of all people affected by my enterprise, and I will
oppose discrimination and exploitation.
I will protect the right of future generations to advance their standard of living and enjoy a
healthy planet.
I will report the performance and risks of my enterprise accurately and honestly.
I will invest in developing myself and others, helping the management profession continue to
advance and create sustainable and inclusive prosperity.
In exercising my professional duties according to these principles, I recognize that my behavior
must set an example of integrity, eliciting trust and esteem from those I serve. I will remain
accountable to my peers and to society for my actions and for upholding these standards.
This oath I make freely, and upon my honor.
+
Business Ethics Defined
â–  The principles, norms, and standards of conduct governing
an individual or group
+
Why Bother Teaching Ethics?
â–  Bad apples are encouraged by bad barrels.
Ø Ethical problems are not caused entirely by bad apples. They’re also the
product of bad barrels—work environments that either encourage
unethical behavior or merely allow it to occur.
Ø bad work environments that not only condone, but may even expect
unethical behavior. Most employees are not bad folks to begin with. But
their behavior can easily turn bad if they believe that their boss or their
organization expects them to behave unethically or if everyone else
appears to be engaging in a particular practice.
â– 
Good character isn’t always enough. Good character alone
simply doesn’t prepare people for the special ethical problems they’re
likely to face in their jobs or professions. Ethical behavior relies on more
than good character,
â–  Adults develop moral judgment into their 30s
â– 
Conduct is influenced by environment. In work settings,
leaders, managers, and the entire cultural context are an important
source of this influence and guidance.
+
Case
You’re the VP of a medium-sized organization that uses chemicals in its
production processes. In good faith, you’ve hired a highly competent
scientist to ensure that your company complies with all environmental
laws and safety regulations. This individual informs you that a chemical
the company now uses in some quantity is not yet on the approved
Environmental Protection Agency (EPA) list. However, it has been found
to be safe and is scheduled to be placed on the list in about three
months. You can’t produce your product without this chemical, yet
regulations say that you’re not supposed to use the chemical until it’s
officially approved. Waiting for approval would require shutting down
the plant for three months, putting hundreds of people out of work, and
threatening the company’s very survival. What should you do?
Ø
The solution isn’t clear, and good character isn’t enough to guide
decision making in this case. As with all ethical dilemmas, values
are in conflict here—obeying the letter of the law versus keeping
the plant open and saving jobs.
CHARACTERISTICS O F I NDI VI DUALS
Individual Differences
Cognitive Biases
Process of Individual Ethical Decision-Making Behavior
MORAL
AWAR EN ESS
ETHI CAL
JUDG M EN T
ETHICAL
BEHAVIO R
CHARACTERISTICS O F O R G A N I Z AT I O N S
Group and Organizational Pressures
Organizational Culture
We recognize that work organizations operate within a broad and complex global business context.
We will cover individual decision making, group and organizational influences, and the social and global environment of
business. The first part of this perspective, the influences on individual decision making, is represented in Figure 1.1.
+Relationship Between Ethics and
the Law (Venn diagram)
Many standards of conduct are agreed upon
by society and not codified in law.
For example, some conflicts of interest may be
legal, but they are generally considered
unethical in our society and are commonly
prohibited in codes of ethics.
If we think of the law as reflecting society’s
minimum norms and standards of business conduct,
we can see a great deal of overlap between what’s
legal and what’s ethical.
For example, racial discrimination was legal in the
United States for a long time. But racial discrimination
was and is highly unethical.
v If one could just follow the law, a business ethics book wouldn’t be necessary.
v legal and ethical domains certainly overlap, but the overlap is far from complete
v As we said earlier, much of the behavior leading to the 2008 financial crisis was legal, but
unethical.
+
â– 
Why Be Ethical? Who Cares?
Individuals care: The Motivation To Be Ethical
A new group of economists who call themselves behavioral economists have found that
people are not only less rational than classical economists assumed, but more moral. For
example, people will mail back lost wallets to strangers.
â– 
Employees care: Employee Attraction and Commitment Organizations are
concerned about their ability to hire and retain the best workers. The evidence suggests
that employees are more attracted to and more committed to ethical organizations.
â– 
Managers care: because they face the thorny problem of how to prevent and manage
unethical behavior in their ranks.
â– 
Executives care
â– 
Industries care: When companies get bad publicity for ethical scandals, whole
industries suffer. So, in some industries, companies have joined together in voluntary
efforts to promote ethical conduct among organizations in the industry.
â– 
Societies care: Business and Social Responsibility
+
This Book Starts With Ethics and
the Individual: Yo u…
…Then it moves to:
Managing Ethics in an
Organization…
…then to:
Organizational Ethics &
Social Responsibility
+ Test Your Cynicism Quotient
1 = Strongly Disagree 5 = Strongly Agree
â– 
Financial gain is all that counts in business.
â– 
Ethical standards must be compromised in business practice.
â– 
The more financially successful the business person, the more
unethical the behavior.
â– 
Moral values are irrelevant in business.
â– 
The business world has its own rules.
â– 
Business persons care only about making profit.
â– 
Business is like a game one plays to win.
â– 
In business, people will do anything to further their own
interest.
â– 
Competition forces business managers to resort to shady
practices
â– 
The profit motive pressures managers to compromise their
ethical concerns.
+
Managing Business Ethics
Chapter 2
Treviño & Nelson – 5th Edition
+
Chapter 2 Overview
Ethical Dilemmas: things can get pretty
Prescriptive Approaches
Focus on consequences (consequentialist theories)
Focus on duties, obligations, principles (deontological theories)
Focus on integrity (virtue ethics)
Eight steps to making sound ethical decisions
Practical preventive medicine
+
What is an Ethical Dilemma?
ØMurky in situations where two or more important values, rights, or responsibilities
conflict and we have to choose between equally unpleasant alternatives.We define
an ethical dilemma as a situation where two or more ‘‘right’’values are in conflict.
A situation where values are in conflict
Two or more values you hold dear – or –
Personal value conflicts with org anizational value
Value
Value
+
The Layoff
You’re the plant manager in one of ABC Company’s five plants. You’ve
worked for the company for 15 years, working your way up from the
factory floor after the company sent you to college. Your boss just told
you in complete confidence that the company will have to lay off 200
workers. Luckily, your job won’t be affected. But a rumor is circulating
in the plant, and one of your workers (an old friend who now works for
you) asks the question. “Well, Pat, what’s the word? Is the plant
closing? Am I going to lose my job? The closing on our new house is
scheduled for next week. I need to know.”
What will you say?
This is a true ethical dilemma because two values are in conflict.
Two ‘‘right’’values that can create significant conflict are truthfulness and loyalty.
As illustrated in the case, telling the truth to your friend would mean being disloyal
to the company that has treated you so well.The value of loyalty can even be in
conflict with itself as you weigh loyalty to your friend against loyalty to your boss and
company.
Ø
+
Prescriptive Approaches
Focus on consequences (consequentialist theories)
Focus on duties, obligations, principles
(deontological theories)
Focus on integrity (virtue ethics)
+ Focus on Consequences
(Consequentialist Theories)
Ø When you’re attempting to decide what’s right or wrong,
consequentialist theories focus attention on the results or
consequences of the decision or action.
Utilitarianism is the best known consequentialist
theory. According to the principle of utility, an ethical decision
should maximize benefits to society and minimize harms.What
matters is the net balance of good consequences over bad for
society overall.
Identify alternative actions and consequences to
stakeholders. A stakeholder is any person or group with a stake
in the issue at hand.
Best decision yields greatest net benefits to society
Worst decision yields greatest net harms to society
+
Focus on consequences – classic
Trolley example
A runaway trolley is hurtling down the
tracks toward 5 people who will be killed if
it proceeds on its present course. You can
save these 5 by diverting the trolley onto a
different set of tracks, one that has only 1
person on it, but if you do this that person
will be killed.
Question: Should you turn the trolley to
prevent 5 deaths at the cost of 1?
+
Consequentialist Questions
Can I indentify all the stakeholders?
â—¼
Immediate, distant?
What are the potential actions I could take?
What are the harms and benefits for stakeholders
given potential decisions/actions?
What decision will produce the most benefit (and
least harm) for the greatest number of people, and
for society atlarge?
Consequentialist Analysis
Stakeholder
Option 1
– Costs
Option 1 Benefits
Option 2Costs
Option 2 Benefits
#1
#2
#3
#4
….etc.
Bottom line = action that produces the greatest good for the greatest
number of people, for society overall and the least net harm for society
overall.!
+
Focus on Consequences
(Consequentialist Theories)
Advantages
Practical
Already underlies business thinking
Challenges
Difficult to evaluate all consequences
Rights of minorities can be sacrificed
+
Focus on Duties, Obligations,
Principles (Deontological Theories)
Ø
Deontologists base their decisions about what’s right on broad, abstract
universal ethical principles or values such as honesty, promise keeping,
fairness, loyalty, rights, justice, compassion, and respect for persons
and property
â—¼
Decisions based upon abstract universal principles:
honesty, promise-keeping, fairness, rights, justice,
respect.
Ø
Certain moral principles are binding, regardless of the consequences.
Therefore some actions would be considered wrong even if the
consequences of the actions were good.
â—¼
Focus on doing what’s “right” (consistent with these
principles) rather than doing what will maximize societal
welfare (as in utilitarianism)
+ Ethical rules (simplified)
Kant’s categorical imperative
Kant provided another useful moral rule with his categorical imperative:‘‘Act as if
the maxim( rule or principle of action) of thy action were to become by thy will a
universal law of nature.’’ This rule asks you to consider whether the rationale for
your action is suitable to become a universal law or principle for everyone to
follow. For example, if you break a promise, the categorical imperative asks,‘‘Is
promise breaking a principle everyone should follow?’’ The answer is no; if
everyone did this, promises would become meaningless. In fact, they would cease
to exist.
“What kind of world would it be if everyone behaved this
way?” “Would I want to live in that world?”
Rawls’ veil of ignorance – for deciding what’s fair
“What would decision be if decision makers knew nothing
about their identities or status?”
Golden Rule
“Treat others as you would have themtreat you” (Assumption is
that both parties are ETHICAL! An ethical person wouldn’t
expect someone else to be unethical for him/her.)
+
Cont…
In our layoff situation, the Golden Rule would suggest that Pat should
tell her friend what she knows because she would want her friend to
do the same for her if the situation were reversed. But note that the
Golden Rule leads you to the best decision only if you’re highly
ethical. For example, do you think that the Golden Rule would expect
you to lie for a friend who has broken the law because you would want
the friend to do that for you? No, because a highly ethical person
wouldn’t ask a friend to lie. The ethical person would be responsible
and would accept the consequences of his or her illegal actions.
+ Deontological Questions
§ Which values or principles apply?
§ Which are most important and why?
§ What are my ethical duties, obligations?
§ Have I treated others as I would want to be treated?
(Golden Rule)
§ Have I assumed that the other(s) is ethical and responsible?
§ If everyone behaved this way, would that be acceptable?
§ Would I want to live in that world? (Kant’s categorical imperative)
§ What would be a fair action if identities were unknown?
(Rawls’ veil of ignorance)
+ Focus on Duties, Obligations, Principles
(Deontological Theories)
Advantages
Rights approach found in public policy debates (e.g.,
abortion)
Because the U.S. Constitution is based on a rights approach, many U.S.
public policy debates revolve around questions such as these. For example,
the abortion debate rests on the question of whether the rights of the
mother or the fetus should take precedence.
Challenges
Determining rule, principle, or right to follow: Golden rule,
Kant’s maxim
Deciding which takesprecedence
Reconciling deontological and consequentialist approaches
when they conflict
+ Focus on Integrity
(Virtue Ethics)
Focus on integrity of moral actor rather than the act. The
goal here is to be a good person because that is the type of person you wish to be.
Considers character, motivations, intentions. it is important that the
individual intends to be a good person and exerts effort to develop him or herself as a
moral agent.
Motivations and intentions are important to ethical decision making, as the law
acknowledges. If a person harms another, society judges that person less harshly if he
or she did not intend to do so, if it was an accident.
Character defined by one’s community.
one’s character may be defined by a relevant moral community, a community that holds
you to the highest ethical standards. Therefore it’s important to think about the
community or communities the decision maker operates within.
Need to identify relevantcommunity.
In virtue ethics, one’s character may be defined by a relevant moral community, a
community that holds you to the highest ethical standards. Therefore it’s important to
think about the community or communities the decision maker operates within.
Disclosure rule
+
â—¼
Cont..
Disclosure rule
A useful decision-making shortcut based on the broader community as a guide is
known as the disclosure rule. This practical shortcut is widely used by managers
and executives. The disclosure rule asks, ‘‘How would you feel if your behavior
appeared on ___?
It asks whether you would feel comfortable if
your activities were disclosed in the light of day in a public forum like the New York
Times or some other news media. In general, if you don’t want to read about it in
the New York Times, you shouldn’t be doing it.
The assumption behind the disclosure rule is that community standards do exist for
most situations, and at a gut level, most of us know what those are. If our gut tells
us it wouldn’t look good to have our behavior appear in one of these media
outlets, we simply shouldn’t be doing it because it means that if we did, we
wouldn’t be considered persons of integrity in society’s view.
+
Virtue Ethics Questions
§What does it mean to be a person of integrity in
this situation, profession, etc.?
§What ethical community would hold me to the
highest ethical standards?
§Do carefully developed community standards
exist?
§ What would the broader community think if this
were disclosed? New York Times test?
§ What would my “harshest moral critic” expect me
to do?
§ What would my “ethical role model” expect?
§ What do I want my professional reputation to be?
+
Virtue Ethics –
Managementas a Profession
The proposed “Hippocratic Oath”
Managers as agents of society – serve public interest, enhance long-term value for
society. Service to the Public and Society.
Enterprise well-being overself-interest. Balance Multiple Stakeholders’ Interests.
Recognize that managers must balance the often-conflicting needs of many
stakeholders to enhance enterprise value in a way that is consistent with societal
well-being.
Obedience to letter/spirit of law and other contracts. Adherence to the Law.
Behavior of integrity – self and others. Acting with Integrity in the Enterprise’s
Interest. Put the interests of the enterprise ahead of personal interests while
behaving as a person of integrity, consistent with personal values, and leading
others to do the same. This means reporting the ethical or legal violations of others.
+
Cont..
Accuracy and transparency in reporting outcomes & processes. Report
enterprise performance accurately and transparently to all relevant
stakeholders (e.g., investors, consumers, the public, etc.) so that they can make
informed decisions.
Treat others with respect/fairness re: others, the powerless. Respectful and
Unbiased Decision Making, Make decisions in an unbiased and respectful
manner without considering race, gender, sexual orientation, religion,
nationality, politics, or social status.The goal is to protect the interests of the
less powerful who are affected by these decisions.
Knowledge/fact-based decision making always using the best and most
current available knowledge to make informed decisions.
Accept responsibility as a professional manager. Recognize that being
considered a professional has privileges that come with responsibilities to
uphold and protect the standards, and continue to develop them in a way that
contributes to the trust, respect, and honor associated with them and with the
profession.
Would this have made a difference in the financial crisis???
+
Focus on Integrity
(Virtue Ethics)
Advantages
Can rely upon community standards
Challenges
Limited agreement about community standards
Many communities haven’t done this kind of thinking
Community may be wrong
+ Eight Steps to Sound Ethical
Decision Making
1.Gather the facts.Facts may simply be unavailable.
For example, in our layoff case, Pat may not have good information about the legal
requirements on informing workers about layoffs. Also, she may not have enough information
to determine how long it would take these 200 workers to find new jobs. It’s important to
recognize these limitations as you do your best to assemble the facts that are available to you.
2.Define the ethical issues. Don’t jump to solutions without first identifying the ethical
issues or points of values conflict in the dilemma.
For example, in the layoff case, one ethical issue has to do with the rights of both the workers and the
company. Another ethical issue has to do with the company’s right to keep the information private. At a
more personal level, there are the ethical issues related to principles such as honesty, loyalty, and promise
keeping.
3.Identify the affected parties (the Stakeholders). we should identify the stakeholders
affected by the decision and ask how they are affected. Try to make your thinking as broad as
possible here. Once stakeholders are identified, role-playing can help you see the issue from
different stakeholder perspectives. This step incorporates the Golden Rule to treat others as you
would like others to treat you. Imagine yourself as each of the players in a decision situation.
What decision would they reach, and why?
+ Cont…
4. Identify the consequences. You should, however, try to identify consequences that havea
relatively high probability of occurring and those that would have particularly negative
consequences if they did occur (even if the probability of occurrence is low).Who would be
harmed by a particular decision or action?
5. Identify the obligations. Identify the obligations involved and the reasons for each one.
For example, in the layoff case, consider Pat’s obligations toward the affected parties.When
identifying Pat’s various obligations, be sure to state the reasons why she has this duty or
obligation.Think in terms of values, principles, character, or outcomes. For example, if you’re
considering Pat’s obligation to keep her promise to her boss, your reasoning might go like
this:‘‘Pat shouldn’t break her promise to her boss. If she does, the trust between them will be
broken. Promise keeping and trust are important values in superior-subordinate
relationships.’’
6. Consider your character and integrity. think about yourself as a person of integrity.
Ask yourself what a person of integrity would do in this situation. In attempting to answer this
question, you may find it useful to identify the relevant moral community and consider what
that community would advise. Remember the disclosure rule.This kind of approach can be
especially valuable when a decision needs to be made quickly.
7. Think creatively about potential actions. Are you assuming that you have only two
choices, either A or B? It’s important to look for creative alternatives. Perhaps if you’ve been
focusing on A or B, there’s another answer: C.
8. Check your gut. if your gut is sending up red flags, give the situation more thought.
+ Practical Preventive Medicine
(When Asked to Make a Snap Decision)
Snap Decision = making decisions quickly
Pay attention to your gut. Don’t underestimate the importance of a hunch
to alert you that you’re facing an ethical dilemma.Your gut is your internal
warning system.
Ask for time. Say something like, ‘‘Let me think about it, and I’ll get backto
you soon.’’ Bargaining for time is a smart way to give yourself a break—then you
can really think about the decision and consult with others.
Find out about organizational policy
Ask manager or peers for advice. You should consider your manager
the first line of defense when you encounter an ethical dilemma. Regardless of
your level within the organization, never hesitate to ask for another opinion.
Use NewYork Times test (disclosure rule). If you’d be embarrassed
to have your decision disclosed in the media or to your family, don’t do it.
+ The Cost to Society of Dying in a Pinto
(in 1971 dollars) equals…
$200,725
The benefit and cost of an $11 safety improvement
would have been:
benefit = $49.5 million
cost
= $137 million
+
Managing Business Ethics
Chapter 3
Treviño & Nelson – 5th Edition
+
Chapter 3 Overview
â– 
â– 
Ethical Awareness and Ethical Judgment
Individual Differences, Ethical Judgment, and Ethical
Behavior
â– 
Facilitators to and Barriers to Good Ethical Judgment
â– 
Toward Ethical Action
â– 
Gioia’s Personal Reflections on the Pinto Fires Case
+ The Relationship between Ethical
Awareness,Judgment, and Action
Ethical
Awareness
Ethical
Judgment
Ethical
Action
Ø With ethical awareness, a person recognizes that a situation or issue is one that
raises ethical concerns and must be thought about in ethical terms. It is an
important step that shouldn’t be taken for granted.
+
Case
You’ve just started a new job in the financial services industry.
One afternoon, your manager tells you that he has to leave
early to attend his son’s softball game, and he asks you to be
on the lookout for an important check that his boss wants
signed before the end of the day. He tells you to do him a
favor—simply sign his name and forward the check to his boss.
What might influence whether you see this as an ethical issue
or not?
+
Influences on ethical awareness
â– 
If peers agree
â– 
If ethical language is used
â– 
If potential for serious harm
Ø
People are more likely to be ethically aware, to recognize the ethical nature of an issue
or decision, if three things happen: (1) if they believe that their peers will consider it to
be ethically problematic; (2) if ethical language is used to present the situation to the
decision maker; and (3) if the decision is seen as having the potential to produce serious
harm to others.
+
Individual Differences Influence
How We Make Ethical Decisions
Individual Differences
Ethical Decision-Making Style
Cognitive Moral Development
Locus of Control
Machiavellianism
Moral Disengagement
Ethical
Awareness
Ethical
Judgment
Ethical
Actions
Cognitive Moral Development
cognitive developmental theory that focuses primarily on how people think about and decide what course
of action is ethically right.
Kohlberg’s cognitive moral development theory proposes that moral reasoning develops sequentially
through three broad levels, each composed of two stages. As individuals move forward through the
sequence of stages, they are cognitively capable of comprehending all reasoning at stages below their
own, but they cannot comprehend reasoning more than one stage abovetheir own.
Ø
â– 
Level I (Preconventional) Individual is very self-centered and views ethical rules as
imposed from outside the self.
â– 
Stage 1 – Obedience and Punishment Orientation
Stage 2 – Instrumental Purpose and Exchange
â– 
Level II (Conventional) the individual is still externally focused on others but is less
â– 
self centered and has internalized the shared moral norms of society.
â– 
Stage 3 – Interpersonal Accord – Conformity – Mutual Expectations ‘‘What
would my trusted supervisor advise?’’
â– 
â– 
Stage 4 – System Maintenance – Upholding duties, laws‘‘What do the rules or laws prescribe?’’
Level III (Postconventional or Principled) make decisions more autonomously.
â– 
â– 
Stage 5 – Social contract and rights ‘‘What does the law say?’’
Stage 6 – Theoretical stage only
+ Cont… From the book
+
Why is Cognitive Moral
Development Important?
â– 
â– 
Because most people reason at the
conventional level and are looking outside
themselves for guidance
That makes “leading” on ethics essential
+
Locus of Control
An individual’s perception of how much
control he or she exerts over events in life.
External
Internal
Ø An individual with a high internal locus of control believes that outcomes are primarily the
result of his or her own efforts, whereas an individual with a high external locus of control
believes that life events are determined primarily by fate, luck, or powerful others.
Ø locus of control is similar to a personality trait that characterizes a person’s thinking and
action across situations. It does not shift from one situation to another.
+
â– 
Connection to Ethical Behaivor?
Internals (individuals with a high internal locus of control) are more likely
to see the connection between their own behavior and
outcomes and therefore take responsibility for their
behavior.
Internals see themselves as being in control of things that happen in their lives. Thus
they’re more likely to take responsibility for the consequences of their actions. It would
be more difficult for such an individual to say, ‘‘Well, it’s not my responsibility; I just work
here,’’
§
Therefore, internals are more likely to do what
they think is right.
+
Machiavellianism
individuals who act in self-interested, opportunistic, deceptive, and
manipulative ways to win no matter what the cost or how it affects other people.
â– 
Self interested
â– 
Opportunistic
â– 
Deceptive
â– 
Manipulative
Ø
The idea that ‘‘the ends justify the means’’ is often associated with Machiavelli.
+ Moral Disengagement
â– 
The tendency for some individuals to deactivate their internal control
system in order to feel okay about doing unethical things
Eight mechanisms used for doing this-allow individuals to engage in unethical
behavior without feeling bad about it.
Euphemistic language our behavior that makes bad behaviour seem more acceptable.
Moral justification unethical behavior is thought to be okay because it contributes to
some socially valued outcome.
Displacement of responsibility. individuals will reduce personal accountability by
thinking of their actions as resulting from an authority figure’s dictates (‘‘my boss made me
do it’’).
Advantageous comparison. people compare their own behavior to more
reprehensible behaviour and thus make their own behavior seem more okay
Diffusion of responsibility. individuals will reduce personal accountability by looking
to others or the group (‘‘it’s not my job,’’ or ‘‘my team made the decision’’)
+
6.
Cont..
Distorting consequences. individuals will think of negative consequences as less
serious than they are (it’s ‘‘no big deal’’ to fudge the numbers on my expense report).
7.
Dehumanization. Individuals make those who would be harmed less worthy of
ethical consideration because they’re thought to be different, stupid, or not even
human.
8.
Attribution of blame. lays blame on the victims of harm for a variety of reasons
(‘‘it’s their own fault’’).
+
Moral Disengagement
STOP
AND
THINK
“It’s not my responsibility – my boss told me to do it.”
“It’s not my responsibility – my team decided this.”
“It’s no big deal!”
“It’s not as bad as (what someone else) is doing.”
“They deserve whatever they get.”
“They brought this on themselves.”
+
â– 
Cognitive Barriers to Good Ethical Judgment
Barriers to Fact Gathering. Be aware, though, that your thinking about the
facts is likely to be biased.
â– 
Overconfidence. Being overconfident can make you fail to search for additional
facts or for support for the facts you have.
â– 
Ø
â– 
“Confirmation Trap”. the tendency to look for information that will confirm our
preferred answer or choice and to neglect to search for evidence that might
prove us wrong.
In an attempt to overcome the confirmation trap, it’s important that you
consciously try to think of ways you could be wrong.‘‘How could I/we be wrong?’’
Barriers to Consideration ofConsequences
1.
Reduced number.
2.
Self vs. others. People inclined to give more weight to the consequences of a
decision or action for themselves (or those close to them) than for others.
3.
Ignore consequences that affect few. People likely to ignore consequences
that are thought to affect only a few people. But consequences that affect only a
few people can be serious.!
+
4.
Cont..
Risk underestimated: illusion of optimism, illusion of control. people tend to
underestimate potential risks because of an illusion of optimism. They overestimate the
likelihood of good future events and underestimate the bad.
Ø
5.
People also generally believe that they’re less susceptible to risks than other people are.
This belief is supported by the illusion of control.
Consequences over time – escalation of commitment
Example: You finally graduated from college and landed a great job, and you’ve invested
most of your savings in the car of your dreams—a used BMW. But in a short time, the car
begins having mechanical problems. Every time you bring it to the mechanic, he claims that
it is fixed for good; but the problems continue and your bank account is being drained.
Should you quit trying to fix the car?
ØBecause you’ve already made the decision to buy the car, and you’ve already invested
a lot of money in it, your tendency will be to continue your commitment to this previously
selected investment. This tendency has been called ‘‘escalation of commitment to a losing
course of action’’ or ‘‘throwing good money after bad.’’
+
â– 
More Cognitive Barriers
Thoughts about integrity
â– 
Illusion of superiority or illusion of morality.
Individuals are likely to think positively about their own ethics. They will
unconsciously filter and distort information in order to maintain a positive self image.
â– 
Paying attention to gut
â– 
Careful! Gut may be wrong
+ Unconscious Biases
The IAT and race bias.
â– 
Ø
•
Ø
One relatively new research tool that can help us understand the potential (often
negative) role of the unconscious in a certain type of ethical thinking is the Implicit
Association Test (IAT).
Results reveal most people’s preferences for young people over old, straight
people over gay, able people over disabled, and a variety of other categories.
Hundreds of studies with the ‘‘race IAT’’ lead to the conclusion that the large
majority of us have an unconscious tendency to value white people more than
black people even if we consciously disavow such views and truly believe that
we have no racial bias.
â– 
The role ofemotions.
Ø
Emotions can aid us in doing the right thing when they alert us to ethical concerns,
cause us to act to help others in need, or keep us from violent reactions.
Consider two classic philosophical dilemmas. In one, a runaway train is headed for five
people who will die if nothing is done. You can save the five by diverting the train to a
different track, where it would kill only one person. Should you divert the train?
In the second dilemma, you’re standing next to a stranger on a bridge over the tracks. The
only way to save the five people is to push the stranger onto the tracks, where his body
would stop the train.
Should you push the stranger?
Ø
The rational logic in these scenarios is similar; in both cases, you would be
+
How it felt to be a recall
coordinator…
“The recall coordinator’s job was serious business. The
scripts associated with it influenced me more than I
influenced [it]. Before I went to Ford I would have argued
strongly that Ford had an ethical obligation to recall. After I
left Ford, I now argue and teach that Ford had an ethical
obligation to recall. But, while I was there, I perceived no
obligation to recall and I remember no strong ethical
overtones to the case whatsoever. It was a very
straightforward decision, driven by dominant scripts for the
time, place, and context.”
Dennis Gioia, former recall coordinatorat Ford
+
â– 
â– 
Toward Ethical Action
Script Processing
â– 
Cognitive frameworks that guide our thoughts and actions. Although
Ø
they are generally not written down, scripts contain information about the
appropriate sequence of events in routine situations.
For example, most of us have a fairly complex script for how to behave in a fancy
restaurant, from tasting the wine to choosing a fork to use to leaving the
appropriate tip.
Cost-Benefit Analysis
â– 
Too simplistic a way of analyzing. Using the cost-benefit analysis made the
decision seem straightforward. If the costs outweighed the benefits therefore it
should not be undertaken.
â– 
No moral dimension. Such simplification can remove moral criteria from the
decisionmaking process and reduce ethical awareness.
+
Case
Mary, the director of nursing at a regional blood bank, is concerned
about the declining number of blood donors. It’s May, and Mary
knows that the approaching summer will mean increased demands
for blood and decreased supplies, especially of rare blood types. She
is excited, therefore, when a large corporation offers to host a series
of blood drives at all of its locations, beginning at corporate
headquarters. Soon after Mary and her staff arrive at the corporate
site, Mary hears a disturbance. Apparently, a nurse named Peggy was
drawing blood from a male donor with a very rare blood type when
the donor fondled her breast. Peggy jumped back and began to cry.
Joe, a male colleague, sprang to Peggy’s defense and told the donor
to leave the premises. To Mary’s horror, the male donor was a senior
manager with thecorporation.
– What is the ethical dilemma in this case?
– What values are in conflict?
-How should Mary deal with Peggy, Joe, the donor, and representatives of
thecorporation?
+
Managing Business Ethics
Chapter 4
Treviño & Nelson – 5th Edition
+
Chapter 4 Overview
â–  Introduction
â–  People Issues
â–  Conflicts of Interest
â–  Customer Confidence Issues
â–  Use of Corporate Resources
â–  When All Else Fails: Blowing the Whistle
â–  Conclusion
+
Voicing Your Values
â–  Purpose
â– 
What are your personal and professional goals? What do you hope to
accomplish? What would make your professional life worthwhile?
â–  Risk
â– 
What is your risk profile? Are you a risk taker, or are you risk averse? What
are the greatest risks you face in your line of work? What levels of risk can
you live with, and which ones can’t you live with?
â–  Personal Communication Style or Preference
â– 
Do you deal well with conflict, or are you nonconfrontational? Do you
prefer communicating in person or in writing? Do you think best from the
gut and in the moment, or do you need time to reflect on and craft your
communication?
+
Voicing Your Values (con’t)
â–  Loyalty
â–  Do you tend to feel the greatest loyalty to
family, work colleagues, your employer, or
other stakeholders, such as customers?
â–  Self-image
â–  Do you identify yourself as being shrewd
or naive? As idealistic or pragmatic? As a
learner or as a teacher?
+
Fairness
Equity: Do people working equally hard receive equal wages?
§
A situation is said to be equitable when something is divided between two people
according to the worth and inputs of the two individuals. For example, in a situation
where two people have shared responsibility for a project, one might ask: ‘‘Did we
work equally hard? Did we receive equal shares? Most people think it’s unfair when
two people have performed the same duty but receive a different share of the
reward.
Reciprocity: If you do this for me, I’ll do that for you.
§
Most people perceive a situation as being unfair if one person fails to hold up his or
her part of abargain.
§
Impartiality:
Are you unbiased? Is the person who’s going to listen to my story biased in some
way,or has he or she prejudged the situation?’’
+
Discrimination
You and Lisa met five years ago when you were hired into the
management training program of a large utility. Although you’re
now in different parts of the organization, you have managed to
stay close over the years. Lisa recently had a baby and plans to
take advantage of the full six months of maternity leave the
company offers. She told you that she’s definitely coming back to
work after her leave, and that her department has promised to
hold her job for her. Meanwhile, you’ve seen a posting for her
job on the company’s website. You run into one of Lisa’s
colleagues in the hall and ask about the posting. He says, “Oh
yeah, they’re going to fill that job. But don’t tell Lisa. She’s got five
more months to be a happy Mom. Besides, they’ll find something
for her to do if she decides to come back.”
+
Discrimination
■ Unequal treatment based on one’s race, gender, ethnicity,
national origin, religion, age, disability, etc.
â–  Standard for hiring, promotions, etc., should be the ability to
do a job
+
Harassment
One of your co-workers is Joanne, a computer whiz with an
offbeat style and a great sense of humor. Two of Joanne’s favorite
“targets” are you and Bill, another co-worker who tends to be
quite standoffish in his business relationships. Joanne is the
department clown and is forever goading you and Bill–you,
because you’re a great audience and clearly think she’s hilarious;
Bill, because she likes to try to get him to be more approachable.
Joanne frequently alludes to sexual subjects and has called both
you and Bill “little alley cats” and “studs.” While Joanne’s
behavior doesn’t offend you at all, you’re surprised when Bill
approaches you in the men’s room and bitterly complains about
Joanne’s constant teasing.
+
Sexual Harassment
â–  Quid Pro Quo means: sexual favors are a
requirement, or seem to be a requirement, for
advancement
â–  Hostile Work Environment — a worker feels
uncomfortable because of unwelcome comments
or behavior of a sexual nature
+
Conflict of Interest
â–  Intersection of professional and personal interests
â– 
A conflict of interest occurs when your judgment or objectivity is
compromised. The appearance of a conflict of interest—when a third party
could think your judgment has been compromised—is generally considered
just as damaging as an actual conflict.
■ Is your judgment or objectivity compromised – or could a third party
could think it’s compromised — by a relationship you have with an
individual or organization
+ Conflicts of Interest
â– 
Overt bribes and kickbacks:Anything that could be considered a bribe or kickback is a
clear conflict of interest. It doesn’t matter whether the bribe or kickback is in the form of money or
something else of substantial value that is offered in exchange for access to specific products, services, or
influence.
â– 
Subtle bribes: Bribes can be interpreted to include gifts and entertainment. Some
organizations have instituted policies that allow no gifts at all, even gifts of nominal value.
â– 
Influence: Your relationship with someone in itself can constitute a conflict of interest. For example, if
you’re in charge of purchasing corporate advertising and your cousin or neighbor or college friend owns an
advertising agency, it will be considered a conflict if you make the decision to hire that firm.
â– 
Privileged information: As an employee, you’re naturally privy to
information that would be valuable to your employer’s competitors. That’s why it’s generally
considered a conflict of interest if you hold a full-time job for A B C Insurance Company and decide to do
some consulting work for XYZ Insurance Company.
Two factors could make such a situation acceptable: if the work you perform at your second job doesn’t
compromise the work you do at your first one, and if both employers are aware of your activities.
+
Conflict of Interest
Your daughter is applying to a prestigious university. Since
admission to the school is difficult, your daughter has planned
the process carefully. She has consistently achieved high marks,
taken preparatory courses for entrance exams, and has
participated in various extracurricular activities. When you tell
one of your best customers about her activities, he offers to write
her a letter of recommendation. He’s an alumnus of the school
and is one of its most active fund raisers. Although he’s a
customer, you also regularly play golf together and your families
have socialized together on occasion.
+
Customer Confidence Issues
Confidentiality: Privacy is a basic customer right. Privacy and the obligation to
keep customer information in confidence often go beyond protecting sales projections or
financial information.
Product Safety.
Truth in advertising: Many salespeople simply exaggerate their product’s (or
service’s) benefits to consumers. Hype is generally a part of most sales pitches, and most
consumers expect a certain amount of hype. In other cases, however, fudging the truth about
a product is more than just hype—it’s unfair.
Special fiduciary responsibilities: certain professions, such as banking,
accounting, law, religion, and medicine, have special obligations to customers. These
obligations are commonly referred to as fiduciary responsibilities.The law and the judicial
system have recognized these special obligations, and they are spelled out in the codes of
ethics for those professions.
Fiduciary responsibilities hold these professionals to a high standard, and when they
violate those responsibilities, the punishment is often harsh.
+
Confidentiality
You work for a consulting company in Atlanta. Your team has
recently completed an analysis of Big Co. including sales
projections for the next five years.You’re working late one night
when you receive a call from an executive vice president at Big
Co. in Los Angeles, who asks you to immediately fax her a
summary of your team’s report.When you locate the report, you
discover that your team leader has stamped “For internal use
only” on the report cover. Your team leader is on a hiking
vacation and you know it would be impossible to locate him. Big
Co. has a long-standing relationship with your company and has
paid substantial fees for your company’s services.
+
Product Safety
You’re the head of marketing for a small pharmaceutical
company that has just discovered a very promising drug for
the treatment of Alzheimer’s disease. You have spent months
designing a marketing campaign which contains printed
materials and medication sample kits for distribution to almost
every family physician and gerontologist in the country. As the
materials are being loaded into cartons for delivery to your
company’s representatives, your assistant tells you that she has
noticed a typographical error in the literature that could
mislead physicians and their patients. In the section that
discusses side effects, diarrhea and gastrointestinal problems
are listed as having a probability of 2 percent. It should have
read 20 percent. This error appears on virtually every piece of
the literature and kits, and ads containing the mistake are
already on press in several consumer magazines.
+
Fiduciary responsibility
Imagine that your financial firm is offering a new issue–a
corporate bond with an expected yield of 7–7.5%. In the past,
offerings like this one have generally been good investments
for clients, and you have sold the issue to dozens of large and
small clients. You’re leaving on a two-week vacation and only
have a few hours left in the office, when your firm announces
that the yield for the bond has been reduced; the high end will
now be no more than 7%. The last day of the issue will be next
week, while you’re away on vacation.What should you do?
+
Fiduciary responsibility
For 12 years, you’ve been the financial advisor for an elderly man
in his late 70s who is an active investor of his own portfolio and
for a trust which will benefit his two children. In the last few
months, you’ve noticed a subtle, yet marked change in his
behavior. He has become increasingly forgetful, has become
uncharacteristically argumentative, and seems to have difficulty
understanding some very basic aspects of his transactions. He
has asked you to invest a sizable portion of his portfolio and the
trust in what you consider to be a very risky bond offering. You
are frank about your misgivings. He blasts you and says that if
you don’t buy the bonds, he’ll take his business elsewhere.
+
Employer-Employee Contract
â–  Expectations
â–  Rights
â–  Consideration
+
â– 
Use of Corporate Resources
Use of corporate reputation: Whenever you identify yourself as an
employee of your company, people can infer that you are speaking on behalf of
it, which is why you have to be careful how you link yourself to your company.
â– 
Corporate financial resources: Use of corporate resources for
personal manner is unethical and violates most corporate policy.
â– 
Providing honest information: Telling the truth within your
organization
and providing honest information to others within your company.
+ Providing a reference
A young woman who works for you is moving with her husband
to another city, where she’ll be looking for a new job. She’s an
excellent worker and when she asks you for a reference, you’re
glad to do it for her. She specifically asks for a written
recommendation on your corporate letterhead.
+
Social Media
You joined one of the country’s largest retail chains, and already you’ve
been promoted to department manager in one of your employer’s largest
stores in an upscale shopping mall. Imagine your surprise when you log
on to Facebook and see that one of your ‘‘friends’’—a young woman who
heads one of the other departments in your store—has posted
confidential store sales on her wall and has also posted sexual comments
about a young man who reports to her.
Social networking sites and other social media present new and thorny problems.What
happens when an employee posts confidential company information on a pubic site? Is it
okay to post sexual comments about a coworker or your boss on a public site? This kind of
behavior can reflect poorly on an employer as well as make the author of such comments
look like an idiot or worse. The scariest part of this scenario is that items posted on the
Internet last forever.You can’t just ‘‘erase’’them and ensure that they’re really obliterated
forever. Organizations take this behavior very seriously. One recent college graduate
hired into a plum job by a national retailer was fired for posting inappropriate content
about his employer on his Facebook wall.
+
Dealing with ajournalist
â– 
You’re an employment counselor at a large outplacement firm.Your
company is currently negotiating with Black Company to provide
outplacement services to 500 employees who are about to lose their
jobs as the result of a layoff. Your neighbor and good friend is a
reporter for the local newspaper, who mentions to you over coffee
one Saturday that she’s writing a story about Black Company.
According to her sources, 1,500 employees are about to lose their
jobs.You know her numbers are incorrect. Should you tell her?
Ø
Dealing with the press—even when the reporter is a friend or relative—is a
tricky business that shouldn’t be attempted by a novice. In a case like the one
above, where you may think your friendly reporter might have incorrect
numbers, silence is truly the best policy. Her numbers may in fact be correct,
and your numbers may represent only the employees who are eligible for
outplacement services, not the total number who are losing their jobs.
+
Use of corporate resources
You’ve been working very long hours on a special project for the
chairman of your company. Your company policy states that
employees who work more than 12 hours in one day may be
driven home by a company car at company expense. Policy also
states that employees who work longer than two hours past the
regular end of their day can receive a meal delivered to the
office at company expense.You and your colleagues who are also
working on the project are arriving at the office at 8:00 a.m. and
order dinner at 7:00 p.m.; then you enjoy dinner and
conversation for an hour and are driven home by company cars.
Is this OK?
+
Providing honest information
Your manager is being transferred to another division of the
company in early January. He calls a meeting in early
November and asks that every department head delay
processing all invoices until after January 1. He wants to keep
expenses low and revenues high so that his last quarter in your
area shows maximum revenue.
+
Blowing theWhistle
If your observations are serious and keeping you awake at night, you may have to report
the problem—blow the whistle—and you need to proceed with great caution. Practicing
living your values is so important.
â–  How strongly do you feel about this issue?
â–  What are your intentions?
â–  Think about power and influence
â–  Weigh the risks and benefits
â–  Consider the timing
â–  Develop alternatives
+
Blowing the whistle
A long-time customer approaches you for financing for a new
business venture. The customer offers as collateral a piece of
property it has purchased in a rural location for the purpose of
building a housing development. You send an appraiser to the
property and he accidentally discovers that this property holds
toxic waste.You’re sure this customer is unaware of the waste; in
fact, the waste is migrating and in a few years will invade the
water table under a nearby farmer’s fields. You explain the
situation to your manager, who naturally instructs you to refuse to
accept the property as collateral, but he also forbids you to
mention the toxic waste to the customer.“Let them find out about
it themselves,” he says. Do you alert the customer to the toxic
waste? Do you alert government regulators?
+Approach your immediate manager first: If your manager tells you to ignore
a How
situation to Blow the Whistle
â– 
or belittles your concern, approach him or her again.
â– 
Discuss the issue with your family: it’s imperative that they know what’s going
on. It’s
also the time to document your activities.
â– 
Take it to the next level: If you receive no satisfaction from your manager, it’s time
to go to the next level of management.The most diplomatic way of going around your
manager is to say to your manager something like,‘‘I feel so strongly about this that I’d like
a meeting with you and your manager to discuss it.’’
â– 
Contact your company’s ethics officer or ombudsman: Find out if your
state has any special legislation regarding whistle-blowing. Your state may have legislative
protection for whistle-blowers, but it may require you to follow certain procedures to
protect yourself.
â– 
Consider going outside of your chain of command: If your company has
no formal department or process for handling such complaints, think about other areas
that would be receptive to your concerns. If your issue is human resources related—if it
involves
relationships or activities within your company like discrimination or sexual harassment—
+
â– 
Cont..
Go outside of the company: If you’ve raised the concern all the way to
the top of your company, still have a job, and are still unsatisfied, your only
choice now is to go outside.
â– 
Leave the company: Some situations might be so disturbing to you that
you have no alternative but to quit your job.
+
Voicing Your Values
You’re a trader who joined a large investment bank two years ago. Pat,
one of your fellow traders, is well known on the Street for being a big
risk taker and a big money maker for the firm. Consequently, he is
popular among your firm’s senior management.You see him at a party
one night and notice that he surreptitiously used cocaine several
times. Several weeks later in the office, you notice that he seems
exceptionally high-spirited and that his pupils are extremely dilated—
you know that both are signs of drug use. You’re thinking of
mentioning something about it to his managing director, Bob, when
Pat makes a particularly impressive killing in the market for your
firm’s own account. Bob jokes that he doesn’t know how Pat does it, but
he doesn’t care.‘‘However he is pulling this off, it’s great for the firm,’’
Bob laughs.You feel strongly that this is a problem and that it places
your firm at risk.You’ve already raised the issue to Pat’s manager, Bob,
who ignored the issue. Do you raise it further? How can you voice your
values in thiscase?
+
Human resources issue
Your division has formed a committee of employees to examine
suggestions and create a strategy for how to reward good employee
ideas. The committee has five members, but you are the only one who is
from a minority group. You’re pleased to be part of this effort since
appointments to committees such as this one are viewed generally as a
positive reflection on job performance. At the first meeting, tasks are
assigned and all the other committee members think you should survey
minority members for their input. During the weeks that follow, you
discover that several committee meetings have been held without your
knowledge. When you ask why you weren’t notified, two committee
members tell you that survey information wasn’t needed at the meetings
and you’d be notified when a general meeting was scheduled. When you
visit one committee member in his office, you spot a report on the
suggestion program that you’ve never seen before. When you ask about
it,he says it’s just a draft he and two others have produced.
+
Conflict of interestissue
You’ve just cemented a deal between a $100 million pension fund
and Green Company, a large regional money manager. You and
your staff put in long hours and a lot of effort to close the deal
and are feeling very good about it. You and three of your direct
reports are having lunch in a fancy restaurant to celebrate a
promotion, when the waiter brings you a phone. A senior account
executive from Green is on the phone and wants to buy you lunch
in gratitude for all your efforts. “I’ll leave my credit card number
with the restaurant owner, he says. “You and your team have a
great time on me.” Describe three courses of action you might
take and the pros and cons of each.
+
Customer confidence issue
You’re working the breakfast shift at a fast food restaurant when a delivery of
dairy products arrives. There’s a story in the local newspaper about
contaminated milk that has been distributed by the dairy which has supplied
a delivery of milk to your restaurant.When you read the article more closely,
you discover that there’s a problem with only a small portion of the dairy’s
milk, and the newspaper lists the serial numbers of the containers that are
problems. When you point out the article to your manager, he tells you to
forget it. “If you think we’ve got time to go through every carton of milk to
check serial numbers, you’re crazy,” he says. “The article says right here that
the chances are minuscule that anyone has a contaminated carton.” He also
explains that,not only doesn’t he have the workers to check the milk, but also
destroying the milk would require him to buy emergency milk supplies at the
retail price. So, he tells you to get back to work and forget about the milk. He
says, “I don’t have the time or the money to worry about such minor details.”
+ Corporate resources issue
You work for Red Co. You and a colleague, Pat Brown, are asked by
your manager to attend a week-long conference in Los Angeles. At
least 25 other employees from Red Co. are attending, as well as many
customers and competitors from other institutions. At the
conference, you attend every session and see many of the Red Co.
people, but you never run into Pat. Although you’ve left several
phone messages for her, her schedule doesn’t appear to allow room
for a meeting. However, when you get back to the office, the
department secretary, who’s coordinating expense reports, mentions
to you that your dinner in L.A. must have been quite the affair.When
you ask, “What dinner?”, she describes a dinner with 20 customers
and Red Co. employees that Pat paid for at a posh L.A. restaurant.
When you explain that you didn’t attend, she shows you the expense
report with your name prominently listed as one of the attendees.
Describe at least two ways in which you could handle this situation.
+
Managing Business Ethics
Chapter 5
Treviño & Nelson – 5th Edition
+
Chapter 5 Overview
n Organizational Ethics as Culture
n Ethical Culture: A Multisystem Framework
n Ethical Leadership
n Other Formal Cultural Systems
n Informal Cultural Systems
n Organizational Climates: Fairness, Benevolence, Self-Interest,
Principles
n Developing and Changing Ethical Culture
n A Cultural Approach to Changing Organizational Ethics
n The Ethics of Managing Organizational Ethics
+
Influence of Culture on Individuals
Individual Differences
Ethical Awareness
Ethical Judgment
Ethical Culture
Ethical Action
+ Organizational Culture
n Expresses shared assumptions, values and beliefs and is the social
glue that holds the organization together. It’s “how we do things
around here.”
Ø
The organizational culture expresses shared assumptions, values, and beliefs and is
manifested in many ways, including formal rules and policies, norms of daily behavior,
physical settings, modes of dress, special language, myths, rituals, heroes, and stories.
To assess and understand an organization’s culture requires knowledge of the
organization’s history and values, along with a systematic analysis of multiple formal and
informal organizational systems.
n Strong – assumptions, values, beliefs widely shared: In a strong culture,
standards and guidelines are widely shared within the organization, providing common
direction for day-to-day behavior.This is likely because all cultural systems, formal and
informal, are aligned to provide consistent direction and to point behavior in the same
direction.
n Weak – subgroup norms more influential: In a weak organizational culture,
strong subcultures exist and guide behavior that differs from one subculture to another.
It’s important to note that weak doesn’t necessarily mean bad. In some situations, weak
cultures are desirable.They allow for strong subcultures featuring diversity of thought and
action. However, in a weak culture, behavioral consistency across the organization is tough
to achieve
+
Culture
n A body of learned beliefs, traditions, and guides for behavior
shared among members of a society or a group
+ Ethical Culture: A Multisystem Approach
Ø Ethical culture is created and maintained through a complex interplay of formal and informal
organizational systems.
Formal Systems
Informal
Systems
Executive Leadership
Role Models/Heroes
Selection System
Policies/Codes
O rientation/Training
Ethical/
Unethical
Behavior
Norms
Rituals
Myths/Stories
Performance
Management
Language
Authority Structure
Decision Processes
Alignment?
+
Alignment and Misalignment
n With alignment, all systems are “pushing”
employees in the same direction – either ethical
or unethical
n With misalignment, employees get mixed
messages about expectations:
opportunities for misalignment abound in these complex systems. For
example, if the same organization touts its honesty in its values statement but
regularly deceives customers in order to land a sale, and the organization
gives a highly ‘‘successful’’ but highly deceptive sales representative the
firm’s sales award, the organization’s formal and informal systems are out of
alignment.
+ Cont… Alignment
To create a consistent ethical culture message, the formal and informal
systems must be aligned (work together) to support ethical behavior. To
have a fully aligned ethical culture, the multiple formal and informal
systems must all be sending employees consistent messages that point in
the direction of ethical behavior.
For example, imagine a company whose formal corporate values statement
and ethics code tell employees that honesty is highly valued in the
organization and that employees should always be truthful with customers
and each other. Consistent with that values statement, the selection system
does background checks on potential employees, incorporates ethicsrelated questions in interviews, and highlights the company’s values to
recruits.
On the informal side, they learn that high-level managers routinely tell
customers the truth about the company’s ability to meet their needs and
that the company celebrates employees of exemplary integrity at an annual
awards dinner. Employees in such an organization receive a consistent
message about the organization’s commitment to honesty, and their
behavior is likely to be honest as well because these formal and informal
systems are aligned and supporting their ethical behavior.
+
Leadership
n Executive Leaders Create Culture
n Leaders Maintain or Change Organizational Culture
Executive leaders affect culture in both formal and informal ways. Senior leaders can create,
maintain, or change formal and informal cultural systems by what they say, do, or support..
Formally, their communications send a powerful message about what’s important in the
organization. They influence a number of other formal culture dimensions by creating and
supporting formal policies and programs, and they influence informal culture by role modeling,
the language they use, and the norms their messages and actions appear to support.
n Ethical Leadership and Ethical Culture
senior executives must develop a ‘‘reputation’’for ethical leadership by being visible on ethics
issues and communicating a strong ethics message.
n Unethical Leadership: explanation in slide 13
n Hypocritical Leadership: explanation in slide 13
n Ethically Neutral or “Silent” Leadership: explanation in slide 13
+ Executive Ethical Leadership Rests
on Two Pillars
Moral Person
Tells followers how leader behaves
n Traits
n Honesty
n Integrity,
n Trust
n Behaviors
n Openness
n Concern for people
n Personal morality
n Decision-making
n Values based
n Fair
Moral Manager
Tells followers how they should behave
and holds them accountable
n Role modeling
n Takes visible ethicalaction
n Rewards/Discipline
n Hold people accountable for
ethical conduct
n Communicating
n Sends an “ethics and values”
message
+ Cont… Moral person and moral manager
The moral person dimension represents the ‘‘ethical’’ part of the term ethical
leadership and is vital to developing a reputation for ethical leadership among
employees. As a moral person, the executive is seen first as demonstrating certain
individual traits (integrity, honesty, and trustworthiness).
But being a moral person is not in itself enough to be perceived as an ethical
leader. Being a moral person tells employees how the leader is likely to behave,
but it doesn’t tell them how the leader expects them to behave. So to complete the
ethical leadership picture, executives must also act as ‘‘moral managers’’—they
must focus on the ‘‘leadership’’ part of the term ethical leadership by making ethics
and values an important part of their leadership message and by shaping the firm’s
ethical culture.
+ Executive Ethical Leadership
Reputation Matrix
Strong
Hypocritical leader
Ethical leader
Moral Manager
Weak
Unethical leader
Ethically ne utral leader
Weak
Moral Person
Strong
+
Cont.. Slide 9
Unethical Leadership:
Unfortunately, unethical leaders can just as strongly influence the
development of an unethical culture. In terms of our matrix, unethical leaders
have reputations as weak moral persons and weak moral managers.
Hypocritical Leadership:
leader who talks incessantly about integrity and ethical values but then
engages in unethical conduct, encourages others to do so either explicitly or
implicitly, rewards only bottom-line results, and fails to discipline misconduct.
This leader is strong on the communication aspect of moral management but
clearly isn’t an ethicalperson.
Ethically Neutral or “Silent” Leadership:
The fact is that many top managers are not strong leaders either ethically or
unethically. They fall into what employees perceive to be an ethically
‘‘neutral’’ or ethically ‘‘silent’’ leadership zone. They simply don’t provide
explicit leadership in the crucial area of ethics.
On the moral person dimension, the ethically neutral leader is not clearly
unethical but is perceived to be more self-centered than people-oriented
+ Other Formal Cultural Systems
n Selection Systems: Selection systems are the formal systems that are in place for
recruiting and hiring new employees. Selection systems are vital to hiring people who fit the
culture of thefirm.
n Values and Mission Statements: Once employees are on board, many
organizations aim to guide employees’ behaviour through formal organizational value
statements, mission statements, credos, policies, and formal codes of ethical conduct. Value
and mission statements and credos are general statements of guiding beliefs. Most companies
have them, but it’s important that the values and mission statement be closely aligned with
other dimensions of the culture.
n Policies and Codes: Formal ethics policies (often called codes of ethics or codes of
conduct) are longer and more detailed than broad values and mission statements. They
provide guidance about behavior in multiple specific areas.
n Orientation and Training Programs: Socialization into the ethical culture is often
begun through formal orientation programs for new employees and is reinforced through
ongoing training. The organization’s cultural values and guiding principles can be
communicated in orientation programs. Employees often receive an introduction to the values
and mission statements as well as the company’s history and current code of conduct. It’s
important to note that the ethics training must be consistent with other ethical culture systems.
+ Cont..
n Performance Management Systems: involve the formal process of articulating
employee goals, identifying performance metrics, and then providing a compensation
structure that rewards individual—and frequently team—effort in relation to those goals.
Performance management systems also include formal disciplinary systems that are
designed to address performance problems when they arise.
n Organizational Authority Structure: Employees are encouraged to take
responsibility for their own actions and to question authority figures if they have concerns.
And individuals are held accountable for negative consequences when they occur and for
reporting problems they observe.
n Decision-making Processes: In an aligned ethical culture, leaders make ethical
concerns a formal part of all decision making. This emphasis on ethics in decision making
can be reinforced by regularly addressing ethical concerns in meetings and by making
them an expected part of managers’ reports regarding new products or new business
ventures.
+ Informal Cultural Systems
It’s important to note that employees are more likely to believe the messages
carried by the informal system.
n Role Models and Heroes: Much socialization about ethics is informally conducted by
role models and mentors. Role models may be senior managers, immediate superiors, or just
more experienced coworkers.
Mentoring occurs at all levels in the organization and is an informal process of socialization
whereby a more senior person takes a junior person under wing, providing information, career
strategies, rules of the road, and so on.
In an ethical culture, heroes should personify the organization’s values.Heroes are symbolic
figures who set standards of performance by modeling certain behaviors, and they can be the
organization’s formal leaders. Heroes can also be founders who are no longer even present in
the organization.The organization’s hero can also be someone who is not the president or chief
executive officer.
n Norms: “The Way We Do Things Around Here”: Norms are standards of daily
behavior that are accepted as appropriate by members of a group. They exert a powerful
influence on individual behavior in organizations, and they can serve to support an ethical or
unethical culture.
Either kind of norm (ethical or unethical) can become ‘‘the way we do things around here’’in the
organization.
+
Cont..
n Rituals: Rituals are an important part of an ethical culture.They tell people symbolically
what the organization wants them to do and how it expects them to do it. Rituals are a way
of affirming and communicating culture in a very tangible way. Organizations have
meetings, parties, banquets, barbecues, and awards ceremonies that all convey messages
about what’s valued in the organization.
eg: Some companies have annual family picnics and ‘‘bring your child to work days’’that
encourage employees to value time with their families. Some have on-site child care so
that having lunch with your preschool child in the company cafeteria becomes a valued
daily ritual and symbol of the extent to which the organization values family.
n Myths and Stories: People tell stories to give meaning to their world and life.
Organizational myths and stories explain and give meaning to the organizational culture.
They may be anecdotes about a sequence of events drawn from the organization’s history.
The story’s characters are employees, perhaps company heroes, and the moral of the
story expresses the organization’s values.
n Language: Cultures develop and use language to communicate values to employees.
The use of ethical language is likely related to decision-making behavior. In one study,
individuals who discussed their decision-making using ethical language were more likely
to have actually made an ethical decision.
+
n
Ethical Climates
Fairness: This refers to whether they believe employees are treated fairly
every day, in terms of outcomes (pay, promotions, termination), processes (are
processes for making these important decisions about employees fair,
nonarbitrary, and unbiased?) and interactions (are employees treated every day
with dignity and respect?).
n
Benevolence: meaning the organization is one that ‘‘cares’’ about multiple
stakeholders, including employees, customers, and the broader community and
public. So employees are much more likely to demonstrate ethical behavior in an
organization they see as one that cares.
n
Self-Interest: in which people protect their own interests above all and
everyone is essentially out for him or herself. Little attention is given to the social
consequences of one’s actions.
n
Principles.
+
Ethical Culture Change
n
From ethical to unethical
n
From unethical to ethical: What should an organization do if it wants to
transform itself into a more ethical culture? Given our multisystem perspective
on ethical culture, changing organizational ethics in a positive direction involves
simultaneously developing or changing multiple aspects of the organization’s
ethical culture. If the effort is to be successful, this ethical culture development
or change should involve the alignment of all relevant formal and informal
organizational systems to focus on ethics.
+ Ethical Culture Change
n Long-term view: The development of organizational culture takes place over a
number of years; effective culture change may take even longer, as much as 6 to 15 years.
n Systems view: The cultural approach relies on the idea that to be successful, any
attempt to develop or change the organization’s ethics must take the entire cultural
system into account The change effort must target multiple formal and informal
organizational subsystems.
n
Diagnose/Audit: Formal attempts to develop or change organizational ethics should
begin with diagnosis. Diagnosing culture calls for time-consuming techniques, such as
auditing the content of decision making, coding the content of organizational stories and
anecdotes, and holding open-ended interviews with employees at all levels. It also
requires systematic analysis of formal organizational systems, such as the structure and
criteria for rewards and promotion.
n Intervene: Once the audit is complete, the data should be discussed with employees,
who can then be enlisted in developing a culture change intervention plan. The plan will
be guided by the diagnosis and the cultural.
n
Evaluate: As with any organizational change and development effort, results should
be evaluated over an extended period of time. Evaluation, like diagnosis and intervention,
should be guided by the multisystem framework. Surveys and interviews can be repeated
regularly to determine if norms have changed and to pinpoint potential problem areas.
Documents can be analyzed to determine if ethical issues are being consistently
considered. Other outcomes, such as number of lawsuits or reports of unethical behavior,
can also be tracked.
+
Managing Business Ethics
Chapter 6
Treviño & Nelson – 5th Edition
+
Chapter 6 Overview
â–  Introduction
â–  Structuring Ethics Management
â–  Communicating Ethics
â–  Using the Reward System to Reinforce the Ethics Message
â–  Evaluating the Ethics Program
â–  Values or ComplianceApproaches
â–  Globalizing and Ethics Program
â–  Conlusion
+
â– 
Structuring Ethics Management
Corporate Ethics Office:Some organizations delegate ethics management
responsibilities widely, finding that a strong statement of values and a strong ethical
culture can keep the ethics management effort together. This approach may be particularly
effective in smaller firms. However, most large firms find that ethics initiatives need to be
coordinated from a single office to ensure that all of the program’s pieces fit together.
â–  Ethics Officers
â–  Insiders vs. Outsiders:
It can sometimes be more difficult for an outsider to achieve credibility in the ethics or
compliance role. But someone brought in from outside the company has the advantage of
being able to evaluate the situation with a fresh eye. If change is needed, that person may be
better able to guide the organization through the change process. Most of those we
interviewed believe that, if available, a respected and trusted insider who knows the
company’s culture and people is usually the best choice.
â– 
Ethics Officer Background: Individuals holding this position come from many
backgrounds. With insiders, the job is often assigned to someone in a staff function (e.g.,
human resources).
+
â– 
Cont…
Ethics Infrastructure: Ethics offices can be centralized, decentralized, or some
combination of both. The decision to centralize or decentralize may depend on
the overall structure of the firm. For example, if the firm’s other staff functions
are highly decentralized, it may be difficult to centralize the ethics function.
However, decentralized ethics offices can be difficult to manage effectively
because they must communicate with each other constantly to ensure consistency
and commitment to the organization’s key values. Even where
â– 
Corporate Ethics Committee: In some organizations, ethics is managed by a
corporate committee staffed by senior level managers from a variety of
functional areas.
+ U.S. Sentencing Guidelines
â–  Established in 1991 for companies being sentenced
or reaching settlements
â–  Apply to allcompanies
â–  Can be triggered by the activities of one employee
â–  Give judges latitude to impose additional fines
â–  Death Penalty is also an option: government forces
company to divest all assets and be liquidated
â–  Do not apply to Equal Employment Opportunity
Commission (EEOC) violations
â–  Such as discrimination, sexual harassment, etc.
â–  E E O C has its own penalties
+ U.S. Sentencing Commission Guidelines – 1991
1. Companies must “self-report” wrong-doing
2. Companies must cooperate with any investigation
3. Companies must have an “effective” ethics program in
place
â– 
â– 
â– 
â– 
â– 
â– 
â– 
Defined, well-communicated policy
Specific executive named to manage ethics and compliance
Care taken re: hiring and promotions
Ethics training and communications for all employees and
agents
Compliance & whistle-blowing systems
Care takenre: future offenses
Consistent discipline
+
Communicating Ethics
â–  Basic Communication Principles
â–  Evaluating the Current State of Ethics Communication
â–  Multiple Communication Channels
â–  Novel Approach to Ethics Communication at USAA
â–  Mission or Values Statements
â–  Policy Manuals
â–  Codes of Conduct
â–  Communicating Senior Management Commitment to Ethics
â– 
â– 
â– 
Ethics training programs
Training new recruits
Training existing employees
â–  Formal Reporting Systems
Explanation in nextslides.
+ Cont….
â– 
Basic Communication Principles: a corporate communication system
consists of formal and informal components. Formal communications include all
formal written and electronic communication—newspapers, magazines, memos,
recruiting literature, policy manuals, annual reports, websites, and advertising—as
well as formalized oral communication such as meetings and speeches. But perhaps
the most powerful component in a corporation’s communication system is an
informal one known as the grapevine.
The grapevine—a continual stream of information among employees about
‘‘what’s really going on’’—exists in every organization. It contains news, rumors,
impressions, and perceptions.
â– 
Evaluating the Current State of Ethics Communication: Before
beginning the actual design of an ethics communication program, it’s essential to
conduct an evaluation that asks the following questions.
â– 
WHAT KINDS OF ETHICAL D I LE MMA S ARE EMPLOYEES LIKELY TO
ENCOUNTER?
â– 
â– 
WHAT DON’T EMPLOYEES K N OW ?
H O W ARE POLICIES CURRENTLY COMMUN I CAT ED?
â– 
WHAT COMMUNICATION CHANNELS EXIST?
+
â– 
Cont..
Multiple Communication Channels: The most obvious ethics communication
channels include a mission or values statement, a code of conduct, policy statements, a
formal process for reporting concerns or observed misconduct, and communications from
leaders.
â– 
Novel Approach to Ethics Communication at USAA: USAA has developed a
novel approach to ethics communication based on a ‘‘mini– case study’’ approach. It gives
employees an opportunity to learn about ‘‘real’’ ethics cases in an ongoing manner, and it
sustains the focus on ethics in the organization.
â– 
Mission or Values Statements: A mission statement is a short description of the
organization’s reason for existence — a sort of ‘‘here’s what we do.’’
Values statements are the next step in the process of explaining an organization to the world—
‘‘and here’s how we do it’.
â– 
Policy Manuals: Policy—the ‘‘rules of the organization’’—is critical to any company,
and most organizations create a policy manual or an intranet site to house all
relevant company rules
+
â– 
Cont…
Codes of Conduct: Codes vary substantially in length, content, and readability; but
they’re generally designed to be the main road map, the ground rules for ethical
conductwithin the organization.
â–  Communicating Senior Management Commitment to Ethics
1.
Ethics training programs : Effective training programs are ongoing efforts to teach
everyone from new recruits to high-level managers.
2. Training new recruits.
3.
Training existing employees: Training is also provided to existing employees and takes a
variety of forms. Some companies provide a basic ethics training module to all employees.
â– 
Formal Reporting Systems: An organization with a strong ethical culture is one
where employees feel free to speak openly about ethical issues, question authority figures,
and report concerns, and where managers are approachable and listen to their people.
+
Know Your Audience
Characteristics
Good Soldier
Loose Canons
Grenades
Needs
● Good compass
● Encouragement
● Know rules
●Reinforcement
● Good compass
● Training
● Don’t know rules
●Heightened supervision
● No compass
● Senior management
● Personal agenda
example
● Swift discipline
●May or may not know
rules
+
Compliance vs. Values-Based Approaches
Compliance-Based
Values-Based
â–  Rooted in law& regulations
â–  Rooted in culture& driven
â–  Reactive
â–  Proactive and aspirational
â–  Limited senior mgmt
â–  Commitment from senior
involvement
â–  Obvious penalties
by values
mgmt
â–  Aligned with performance
measures
■ “Signatures required”
With a compliance emphasis, the focus is more on
required behavior—obeying the letter of the law rather
than aspiring to lofty ethical principles. Disciplinary
procedures for violators are also important to
compliance efforts.
The values approach is proactive and aspirational.
It emphasizes expected behavior and an effort to
achieve high standards represented by the spirit of
the law and organizational values.
+
Compliance vs. Values-Based Approachesv
Values-Based
Compliance-Based
â–ª
Employees more likely to:
â–ª
â–  think company is
Employees more likely to:
â–  seek advice inside
protecting itself
â–  seek advice outside
â–  be cynical (employees often
â–  be willing toreport
â–  be committed
â–  support decisions
view a strictly compliance
oriented program with cynicism)
â–  be aware of ethical &
legal issues
â–ª
Less likely to:
â–  report bad news
â–  be committed
â–ª
Less likely to be unethical
+ What’s wrong with this picture?
You’re a management consultant who has been asked by Green
Company to help design an ethics communication and training program
for all Green Co. employees. Your meetings to date have been with the
head of human resources, and your contract with the company has been
negotiated with him. Once the papers have been signed, you begin
your research and are quickly stymied by Green’s corporate counsel.
He says that you will not be allowed to ask employees about ethical
dilemmas that have occurred at Green. He specifically asks that you get
your information from other sources such as press accounts of problems
in the industry, or from other organizations with which you’ve worked.
In addition, the head of human resources has told you that you’ll be
unable to meet the three most senior executives because they’re busy
negotiating a large acquisition. You will have access to other high-level
managers who can tell you what they think the seniors want. You’re
instructed to write a code of conduct for the company, a mission
statement, and prepare presentations for the seniors to give to
employees sometime next month on corporate expectations and values.
+
Managing Business Ethics
Chapter 7
Treviño & Nelson – 5th Edition
+
Chapter 7 Overview
â–  Introduction
â–  In Business, Ethics Is about Behavior
â–  Our Multiple Ethical Selves
â–  Rewards and Discipline
■ “Everyone’s Doing It”
â–  People Fulfill Assigned Roles
■ People Do What They’re Told
â–  Responsibility Is Diffused in Organizations
â–  Conclusion
+
Underlying Assumptions Underlying our
recommendations to managers are three key assumptions:
â–  Managers want to be ethical
â–  Managers want their subordinates to be ethical
â–  Based on their experience, managers will have insight into
the unique ethical requirements of the job
+
Advice: Ethical Behavior
What are the practical implications for managers?
■ Think of ethics in behavioral terms – what behavior are you
looking for?
â–  Specify the behavior you want and explain why
â–  Create a work environment that supports that behavior
+
Multiple Ethical Selves
â–  Ken Lay
â–  Dennis Levine
â–  Practical Advice:
â–  Analyze yourself
â–  Observe your subordinates
â–  Identify what influences them
Ken Lay
+
Reward systems
What gets rewarded, gets done!
â–  People will go the extra mile to achieve goals set by
management: goals focus attention on the desired
outcome, and they lead individuals to strategize about how
to achieve the goals that have been set. That is generally
considered to be a good thing. Meeting the goal makes
Sandy feel good and it results in a significant valued reward.
â–  Goals combined with rewards can encourage unethical
behavior : that’s why responsible managers need to be
clear about the importance of using only ethical means to
achieve the goals they have set for their employees. The
statement, ‘‘I don’t care how you do it, just get it done,’’
should send up a huge red flag that triggers ethical
awareness. Managers shouldn’t say it, and workers should
beware of ethical land mines if they hear it.
+
Reward systems
What gets rewarded, gets done!
â–  Practical Advice:
â–  Think about what kind of behavior and attitudes are
being rewarded explicitly and implicitly
â–  Think about goals, likely behavior, unintended
consequences
■ Ethical Pygmalion effect – expectations of high standards
and ethical behavior,
With the ethical Pygmalion effect, expectations for ethical
behavior are set high, and people are expected to fulfill
them. This ethical Pygmalion effect appeals to people’s
desire to do what’s right. It is also likely to get people to
think about how they achieve their goals, not just whether
they’ve achieved them.
+
Recognize the Power of Indirect
Rewards and Punishments
â–  Social learning theory: people learn from observing the
rewards and punishments of others. So workers’ behavior is
influenced even when they don’t experience a reward or
punishment themselves
â–  Tailhook example
â–  Rewarding ethical behavior: Rewards may be a limited tool for
influencing specific ethical behaviors today or tomorrow, but
they should be used to set the tone for what’s expected and
rewarded in the long term.
â–  Difficult in the short term
â–  Easier over the long term
+
Punishment
■ Critical part of a manager’s job
â–  Must be administered fairly
â–  Fits the crime
â–  Consistent with what others have
received
â–  Employee has input
â–  Conducted in private
â–  Explanation that ties punishment to
misconduct
■ Recognize punishment’s indirect
effects
â–  Thomas J. Watson, Jr. IBM example
+
Discipline
Practical advice for managers:
â– 
Adults differentiate between fair and unfair discipline
â– 
Punishment is expected if rules are broken
â– 
Discipline fairly
â– 
Be concerned about observers and implicit messages
+ People Follow Group Norms
■ Rationalizing unethical behavior: the refrain ‘‘everyone is
doing it’’ is used primarily to rationalize behavior that’s
guided by unethical norms. The employee who inflates his
or her expense reports believes that it’s justified first
because everyone else is doing it
â–  Pressure to go along: Many individuals will go along with
unethical behavior because of their strong need to be
accepted. If left to their own devices, they might very well
follow the rules. But in the group situation, they feel that
they have no choice but to comply, or at least to remain
silent about what others are doing.
+
Cont…
â– 
Practical advice for managers
â– 
Be aware of group norms: Group norms represent what’s
really happening in the group, and you must be in touch
with this reality. Any new employee will be quickly
schooled in ‘‘the way we do things in this group’’ and will
be expected to go along. Loyalty to the group may be the
most powerful norm and one that’s extremely difficult to
counteract.
â– 
Consider whether the reward system implicitly rewards
misconduct
â– 
Slade Company example
+
Deindividuation – People Fulfill
Assigned Roles
â–  Cagney & Lacey example
â–  Research: Zimbardo Prison experiment
â–  Roles at work
â–  Conflicting roles can lead to unethical behavior: The best way
to avoid this type of dishonesty is to minimize conflicting role
demands.
â–  Roles can support ethical behavior: those that support and
encourage unethical behavior should be changed. Those that
encourage ethical behavior (whistle-blowing) should be
bolstered.
â–  Practical advice for managers
â–  Roles influence behavior
â–  Analyze roles and role conflicts
â–  Determine whether jobs need to be altered
+
â– 
â– 
Deindividuation
Roles are strong forces for guiding behavior, and
workers are assigned roles that can powerfully
influence their behavior in ethical dilemma
situations. Roles can reduce a person’s sense of
his or her individuality by focusing attention on
the role and the expectations that accompany it.
It doesn’t really matter who fills the role. It’s the
role requirements that are important. This focus
on the role reduces the individual’s awareness of
the self as an independent individual who is
personally responsible for an outcome.
+
People Do What They’re Told
■ Research: the “shocking” Milgram experiment
â–  Obedience to authority at work
â–  Practical advice for managers
â–  Recognize the power managers hold as
legitimate authority figures
â–  Use this power to set high
ethical standards
+ Cont…
■ Research: the shocking” Milgram experiment:
They provide uncomfortable insights into how normal adults behave in
authority situations.37 Most adults will carry out the authority figure’s
orders even if these orders are contrary to their personal beliefs about
what’s right and lead to harm of other human beings.
New Haven, Connecticut, area to participate in a one-hour study on the
effects of punishment on learning. The subject was asked to play ‘‘teacher’’
in a learning experiment; the ‘‘learner,’’ unbeknownst to the
teacher/subject, was a member of the research team. The learner was
strapped into a chair with an electrode attached to his or her wrist. The
teacher/subject was seated at a shock generator and was told to pose
questions to the learner. Each time the learner provided an incorrect
response to a question, the teacher/subject was told to turn a dial to
administer an increasingly severe shock—though in fact no shocks were
actually given.
+ Cont…
â–  Obedience to authority at work
To the surprise of Milgram and other observers, about 60
percent of the teacher/subjects in these experiments
continued to the end, obeying the authority figure’s
instructions despite the conflict they felt and expressed. It’s
not that they felt okay about what they were doing. In fact,
their emotional appeals to the experimenter suggested that
they very much wanted to stop. But most of them didn’t.
Authority figures therefore must exhibit ethical behavior, and
they must send powerful signals that high ethical standards
are expected of everyone and that employees are expected
to question authority figures if they believe they are being
asked to do something that is wrong
+ Diffused Responsibility
■ “Don’t worry – we’re taking care of everything”
â–  Workers encouraged to turn over responsibility to those in
higher levels
â–  Diffusion of responsibility in groups
â–  Bystander research
■ Groupthink and “illusion or morality”
â–  Ensure that alternative views are aired
â–  Divide responsibility
â–  Specialization
■ “Fragmentation of conscience”
â–  Create psychological distance
+ Cont…
â– 
Diffused responsibility: Responsibility is diffused because it
is taken away, shared with others in decision-making groups,
obscured by the organizational hierarchy, or diluted by
psychological distance to potential victims.
â– 
Diffusion of responsibility in groups: is used to explain the
results of classic research on the likelihood that bystanders
will help a seizure victim.43 This research suggests that when
others are present, responsibility is diffused among all of the
bystanders and individuals are less likely to help.
â– 
Diffusing Responsibility by Creating Psychological Distance:
Responsibility can also be diffused because of the
psychological distance between the decision maker and
potential victims.48 When potential victims are
psychologically distant or out of sight, it’s more difficult t…
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