LESSON 4: MANAGERIAL ETHICS AS PREREQUISITE TO CSR

ETHICS

• Is essential in different aspects of life. It provides a landscape of the individual's personality.

• Is the code of moral principles and values governing the behaviors of a person or group with respect to what is right and wrong.

MANAGERIAL ETHICS

• Is the rules and principles, decided by upper management, that spell out what is right and wrong in an organization.

• Is intended to make it easier for managers to make the right decisions on the job when a conflict of values is presented.

Utilitarian approach (Criteria)

• Assesses an action in terms of its consequences or outcomes.

• It strives to achieve the greatest good for the greatest number while creating the least amount of harm or preventing the greatest amount of suffering.

JEREMY BENTHAM and JOHN STUART MILL.

Utilitarian approach, Developed and exposed by the philosophers.

Individualism approach (Criteria)

• Contends that acts are moral when they promote the individual's best long-term interests.

• Every person in an organization is morally responsible for his or her own behavior, and any effort to change that behavior should focus on the individual.

Moral rights approach (Criteria)

• This approach emphasizes that every human being has fundamental rights and freedom that cannot be taken away by the individual's decision.

• Every person in an organization is morally responsible for his or her own behavior, and any effort to change that behavior should focus on the individual.

1. The right to free consent

2. The right to privacy

3. The right of freedom of conscience

4. The right of free speech

5. The right of due process

6. The right of life and safety

Moral Rights

Justice approach (Criteria)

States that an ethical decision is a decision that distributes benefits and harms (costs) among stakeholders in a fair, equitable, or impartial way.

Distributive Justice (Types of Justice)

• refers to the perceived fairness of an allocation or, more broadly, to how people judge what they receive.

• For example, public programs that provide social security or medical care to all elderly and retired people.

Procedural Justice (Types of Justice)

• is the idea of fairness in the processes used to resolve disputes, and how people’s perception of fairness is impacted.

• focuses on the way police and other legal authorities interact with the public, and how the characteristics of those interactions shape the public's views of the police, their willingness to obey the law, and actual crime rates.

Compensatory justice (Types of Justice)

refers to the extent to which people are fairly compensated for their injuries by those who have injured them; just compensation is proportional to the loss inflicted on a person.

Dilemma

is a situation where there is a difficult choice between two or more options. Dilemmas have good points and bad points on both sides.

Ethical dilemma

is a moral problem with potential right or wrong answers. It occurs in business when a business has a decision to make that weighs values and morals against profitability and competitiveness.

1. Stop, think and identify the ethical dilemma.

2. Embark on a fact-finding mission.

3. Clarify your goal

4. Brainstorm options

5. Mull the consequences

6. Make your ethical decision

7. Monitor and adapt.

7 GUIDELINES FOR ETHICAL DECISION-MAKING

MANAGERIAL DECISION MAKING

From an organizational point of view, the decision-making process is such an integral and important part of management that some thinkers propose that management is simply a decision-making process.

Herbert A. Simon

A theory of administration should be concerned with the process of decision as well as with the process of action.

1. Identifying the problem.

2. Generating alternative solution.

3. Selecting a solution.

4. Implement and evaluating the solution

SIMON DECISION-MAKING MODEL

Programmed decision making (Factors)

Programmed decisions are made in predictable circumstances and managers have clear parameters and criteria.

Non- programmed decisions (Factors)

Are made in unique circumstances and the results of such decisions are often unpredictable. It requires a custom-made response and is usually handed to top managements.

Information inputs (Factors)

It is very important to have adequate and accurate information about the situation for decision- making otherwise, the merit of the decision will suffer.

Prejudice (Factors)

_____ and bias are introduced in our decisions by our perceptual processed and may cause us to make ineffective decisions.

Cognitive constraints (Factors)

Human brain, which is the source of thinking, creativity, and decisions- making, is limited in capacity in several ways.

Attitudes about risk and uncertainty (Factors)

are developed in a person, partly due to certain personal characteristics and partly due to organizational characteristics.

Intelligence of the decision-maker (risk-taking attitudes)

Higher intelligence generally results in highly conservative attitudes and highly conservative decision-makers take low risks.

Expectation of the decision-maker (risk-taking attitudes)

People with high expectations are generally highly optimistic in nature and are willing to make decisions even with less information.

Time constraints (risk-taking attitudes)

As the complexity of the personal habits of the decision-maker and the complexity of the decision variables increase, so does the time required to make a rational decision.

Personal habits (risk-taking attitudes)

Formed through social environmental influences and personal perceptual processes must be studied to predict his decision – making style.

Social and cultural influences (risk-taking attitudes)

Major impact on the style of the decision-maker is made by the social and group norms

‘rational decision-making’

These steps are generally followed to make systematic, objective, analytical and unemotional decisions and some management scholars have called this process a _______

Perception and diagnosis of the problem (steps)

Problems are defined in terms of discrepancy or deviation between the desired and actual situation. A problem once isolated must be defined and formulated.

Generation of alternate solutions (steps)

All possible solutions should be considered because the most obvious solution may not be the optimal solution.

Evaluation of alternatives and selecting a course of action (steps)

Finding the optimal choice requires the consideration of the possible impact of all alternatives in such a manner that the chosen course of action will not only meet the requirements of the objectives but also eliminate the root cause of the problem.

Implementation of the decision (steps)

means putting the selected alternative into action and seeing it through to its completion.

Monitoring feedback (steps)

It determines the effectiveness of the implemented decision. If possible, a mechanism should be built into the process, which would give periodic reports on the success of the implementation.

No Co-relation between Managerial Ability and Ethics (primary reasons)

Managerial ability is about planning, organizing, developing/deploying/directing, coordinating, and controlling a particular activity. Hardly any of these functions require ethical input.

Greed (primary reasons)

Desires to achieve material success drives them towards unethical conduct.

Short-term focus (primary reasons)

Managers lack patience and take short cuts of unethical way to achieve quick material success.

Inadequate moral development (primary reasons)

Many managers during their development process don’t get exposed to not reach post.

Misplaced loyalty (primary reasons)

They attach more loyalty to their company rather than society. They take bad decisions to benefit the company.

Peer pressure (primary reasons)

Man living in an environment where unethical decisions are routine among peers.

Company’s policies (primary reasons)

Many companies give little importance to ethical issues in their business. Profit is their only God. To retain their livelihood in such companies, many desperate managers succumb to the pressure.

Insufficient information (problems)

It refers to the lack of information which affects the performance and quality of the management in an organization.

Insufficient knowledge (problems)

It refers to the difference between available knowledge and the required information for the management to take a decision.

Poor communications (problems)

It leads to the problem that arises due to improper communication of information.

Lack of time (problems)

It refers to the pressure on the management to make decisions. If time is limited, then the management needs to take hasty decisions.

ETHICAL GUIDELINES

• Obeying the law

• Tell the Truth

• Uphold human dignity

• Adhere to the golden rule “DO UNTO OTHERS AS YOU WOULD HAVE OTHERS DO UNTO YOU”

• Premium Non-Nocere (Above all, do no harm)

• Allow room for participation

• Always Act When You Have Responsibility

Top Management Commitment (tools)

Managers can prove their commitment and dedication for work and by acting as role models through their own behaviors.

Codes of Ethics (tools)

A formal document that states an organization’s primary values and the ethical rules it expects employees to follow.

Ethics Committees (tools)

Appointment of an ethics committee, consisting of internal and external directors, is essential for institutionalizing ethical behavior.

Ethics Audits (tools)

Systematic assessment of conformance to organizational ethical policies, understanding of those policies and identification of serious deviations requiring remedial action.

Ethics Training (tools)

It enables managers to integrate employee behavior in the ethical arena with major organizational goals.

Ethics Hotline (tools)

Special telephone line that enables employees to bypass the normal chain of command in reporting their experiences, expectations, and problems.