MGT Exam 2

intuition and moral judgement model

ethical situation → affect → reasoning → judgement

OR

ethical situation → reasoning → judgement

framework for understanding ethical decision making in business

ethical issue intensity + individual factors + organizational factors + opportunity → business ethics evaluation and intentions → ethical or unethical behavior

ethical awareness

the ability to perceive whether a situation or decision has an ethical dimension

ethical issue intensity

the relevance or importance of an event or decision in the eyes of the individual, work group, and/or organization

individual factors for ethical decision making

• gender

• education

• nationality

• age

• locus of control

locus of control

individual differences in relation to a generalized belief about how one is affected by internal vs external events or reinforcement, how people view themselves in relation to power

external control view

see themselves as going with the flow because that is all they can do, events happen due to uncontrollable forces

internal control view

believe they control the events in their lives by their own efforts and skills, they view themselves as the masters of their destiny and trust in their ability to control their environment

organizational factors for ethical decision making

• corporate culture

  • ethical culture

  • leadership

• significant others

• obedience to authority

corporate culture

a set of values, norms, and artifacts, including ways of solving problems that members of an organization share

ethical culture

acceptable behavior, as defined by the company and industry, reflects the integrity of decisions made

significant others

those who have influence in a work group, including peers, managers, coworkers, and subordinates

obedience to authority

a reason employees resolve business ethics issues by simply following the directives of a superior, willingness to just follow commands

opportunity in ethical decision making

the conditions in an organization that limit or permit ethical or unethical behavior, can be limited through formal code of ethics

business ethics intentions, behavior, and evaluations

when intentions and behavior are inconsistent with their ethical judgement, people may feel guilty

Kohlberg’s model of cognitive moral development

• stage 1: punishment and obedience

• stage 2: instrumental and relative orientation

• stage 3: interpersonal concordance orientation

• stage 4: maintaining social order

• stage 5: social contract

• stage 6: universal ethical prinicples

stage 1: punishment and obedience

right and wrong are not connected with any higher order or philosophy but rather with a person who has power

stage 2: instrumental and relative orientation

right is what serves individual needs

stage 3: interpersonal concordance orientation

living up to the expectations of those for whom the person feels loyalty, affection, and trust

stage 4: maintaining social order

individuals determine what is right by considering their duty to society

stage 5: social contract

individuals are concerned with upholding basic rights and values

stage 6: universal ethical principles

right is determined by universal ethical principles

normative approaches to ethical decision making

how organizational decision makers should approach an issue, considers the standards of behavior within the firm/industry

instrumental concern

focuses on positive outcomes, including firm profitability and benefits to society, used to justify the adoption of core values

institutional theory

organizations operate according to taken-for-granted institutional norms and rules

veil of ignorance

a thought experiment that examined how individuals would formulate principles if they did not know what their future position in society would be, principles are not biased by one’s social position

equality principle

each person has basic rights that are compatible to the basic liberties of others

difference principle

economic and social inequalities should be arranged to provide the most benefit to the least-advantaged members of society

moral philosophy

the specific principles or values people use to decide what is right and wrong

moral philosophies

• teleology

• deontology

• relativist perspective

• virtue ethics

• justice

teleology

an act is considered morally right or acceptable if it produces some desired result, such as pleasure, knowledge, career growth, the realization of self interest, utility, wealth, or even fame

consequentialism

teleological philosophies that assess the moral worth of a behavior by looking at its consequences

egoism

defines right or acceptable behavior in terms of its consequences for the individual

enlightened egoism

a long-range perspective that allows for the well-being of others although their own self-interest remains paramount

utilitarianism

seeks the greatest good for the greatest number of people

cost-benefit analysis

a utilitarian decision maker calculates the utility of the consequences of all possible alternatives and then selects the one that results in the greatest benefit

rule utilitarians

argue that general rules should be followed to decide which action is best

act utilitarians

the rightness of each individual action must be evaluated to determine whether it produces the greatest utility for the greatest number of people

criticisms of utilitarianism

can violate rights and justice

deontology

focus on the rights of individuals and the intentions associated with a particular behavior rather than its consequences

nonconsequentialism

regard for certain behaviors as inherently right or wrong

categorical imperative

if you feel comfortable allowing everyone in the world to see you commit an act and if your rationale for acting in a particular manner is suitable to become a universal guiding behavior, then committing that act is ethical

teleology vs deontology

teleology:

• ends justify the means

• what’s good for the person/community/society/world

deontology:

• some things are inherently right/wrong

relativist perspective

ethical behavior is derived subjectively from the experiences of individuals and groups, different cultures exhibit different norms, customs, and values

what does the relativist perspective propose

that people naturally see situations form their own perspectives; moral claims can only be evaluated as true or false relative to a particular individual or culture’s moral standards

virtue ethics

ethical behavior involves not only adhering to conventional moral standards but also considering what a mature person with a “good” moral character would deem appropriate

justice

fair treatment and due reward in accordance with ethical or legal standards

distributive justice

based on the evaluation of the outcomes or results of a business relationship, if some employees feel they are paid less than their coworkers for the same work, they are concerned with this

procedural justice

considers the process and activities that produce a particular outcome, focuses on the fairness and transparency of processes that make decisions

interactional justice

based on the relationships between organizational members, including the way employees and management treat one another, focuses on how people are treated when decisions are made, and how fairly they are treated in everyday interactions

white-collar crime

crimes perpetrated every year by nonviolent business criminals

what do white-collar criminals look like

they tend to be highly educated, in positions of power, trust, respectability, and responsibility

the two basic dimensions to describe culture:

1. concern for people

2. concern for performance

four categories of organizational culture

• apathetic culture

• caring culture

• exacting culture

• integrative culture

apathetic culture

shows minimal concern for either people or performance

caring culture

exhibits high concern for people but minimal concern for performance issues

exacting culture

shows little concern for people but high concern for performance

integrative culture

combines high concern for people and performance

cultural audit

an assessment of an organization’s values

sarbanes-oxley 404

requires firms to adopt a set of values that forms a portion of the company’s culture, should expose mismanagement, fraud, theft, and abuse

compliance-based culture

codes of conduct established with compliance as their focus

values-based culture

top-down integrity approach with shared values, norms, and codes of ethics that provide a standard of conduct, compliance is an element that is necessary

differential association

people learn ethical or unethical behavior while interacting with others, obedience to authority is an element

organization size as an organizational factor

as the size of an organization increases, individual ethical beliefs and decision-making behavior decreases, diffusion of responsibility

business competitiveness as an organizational factor

the level of overall business competitiveness may influence an individuals ethical beliefs and decision-making behavior

organizational structures

• centralized organization

• decentralized organization

centralized organization

decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels

decentralized organization

decision-making authority is delegated as far down the chain of command as possible

group norms

standards of behavior groups expect of their members

types of groups

• formal group

• informal group

formal group

an assembly of individuals with an organized structure such as committees, work groups, and teams

informal group

two or more individuals with a common interest but without an explicit organizational structure, such as the grapevine

ethical behavior control systems

• compliance orientation

• values orientation

compliance orientation

a control system that creates order by requiring employees to identify with and commit to specific required conduct

values orientation

a control system that strives to develop shared values

codes of conduct

formal statements that describe what an organization expects of its employees

code of ethics

consists of general statements, sometimes altruistic or inspirational, that serve as principles and as the conduct basis for rules of conduct

value statement

a declaration of an organization’s top priorities that serves the general public and also addresses distinct groups such as stakeholders

ethics officers

high-level executives responsible for managing their organizations’ ethics and legal compliance programs

ethics audit

a systematic evaluation of an organization’s ethics program and performance to determine effectiveness

balanced scorecard

a performance management tool that details a company’s performance through financial and non financial perspectives, giving management a comprehensive view of the business

bad apple bad barrel analogy

some people are just “bad apples” who will always do things in their self-interest, and some organizations are just “bad barrels” that create unethical behavior through pressures to succeed

triple bottom line

a perspective that takes into account the social, environmental, and financial impacts of decisions made within an organization; profit, people, planet

ESG

a framework evaluation of firm performance in the areas of environmental, social, and governance