module 4

Ethics

code of moral principles and values that governs the behavior of a person or group with respect to what is right or wrong

Three domains of human actions

codified law, free choice, and ethics

Codified Law

Values and standards written into the legal system and enforceable in court.

• is the behavior legally permitted

Free Choice

Behavior not covered by law, for which an individual has complete freedom

• What may a person choose to do?

Ethics

Standards of conduct based on shared principles and values concerning moral behavior.

• What is the morally right or wrong action?

Unethical behavior may result from:

personal ego, greed, pressure to increase profits, a desire to appear successful.

Managers position during ethical climate

their actions communicate what behavior is genuinely values, especially when employees face pressure or difficult choices.

The Business Case for Ethics and Social Responsibility

not only a moral concern, positive relationship between ethical and socially responsible behavior and a firm’s financial performance.

• people prefer to work for ethical companies

• More customers would switch brands to do business with a company that is ethical and socially responsible

• Ethical conduct can support employee attraction, customer loyalty, and organizational performance

Ethical Dilemma

situation concerning right and wrong in which values are in conflict.

• right and wrong may not be clearly defined, and the issue may be complex

Moral Agent

The person who must make an ethical choice in an organization

Frameworks for Ethical Decision Making: Utilitarian Approach

moral behavior produces the greatest good for the greatest number.

• which alternative will create the most benefit or least harm for the largest number of people.

Frameworks for Ethical Decision Making: Individualism Approach

an act is moral if it promotes the individual’s best long-term interests.

• focuses on long-term interests and consequences of an action for the individual as well as immediate personal advantage.

Frameworks for Ethical Decision Making: Moral-Rights Approach

human beings have fundamental rights and liberties that cannot be taken away by an individual’s decision

• manager considers whether a decision violates the basic rights or freedoms of people affected by it.

Frameworks for Ethical Decision Making: Justice Approach

moral decisions must be based on standards of equity, fairness, and impartiality

Justice Approach: Distributive Justice

Different treatment of people cannot be based on arbitrary characteristics. (gender, race, age)

• Are benefits, opportunities, or burdens distributed fairly?

Justice Approach: Procedural Justice

Rules must be administered fairly

• Was the same legitimate process applied consistently?

Justice Approach: Compensatory Justice

Individuals should be compensated for the cost of injuries by the party responsible.

• Has the responsible party fairly addressed the harm caused?

Frameworks for Ethical Decision Making: Practical Approach

decisions on prevailing standards, society, and all stakeholders,

Considered ethical:

• acceptable to the professional community

• manager would not hesitate to publicize the decision

• would feel comfortable explaining it to public

Personal Influences

individual’s bring their own personalities and traits to organizations. Shaped by:

• personal needs

• family influence

• religious background

• personality characteristics

Stages of Moral Development, Lawrence Kohlberg: Preconventional morality

First Level, where children judge right and wrong based directly on direct personal consequences. Controlled by adults and results of actions rather than internal values.

• Self-interest

Stages of Moral Development, Lawrence Kohlberg: Conventional morality

Right or wrong based on meeting the expectations of others and the social system

• A person may follow colleagues’ behavior because it appears to be what others expect.

Stages of Moral Development, Lawrence Kohlberg: Principled morality

Acting according to personal ethical principles.

• person would resist if they believed the action was ethically wrong.

Servant Leadership

Managers focus on the needs of followers and encourage others to think for themselves.

• helping employees rather than merely directing or controlling them. Supports independent though and the development of others.

Giving Cultures

organizational cultures in which people help one another.

Leads to:

• Greater sharing of information

• More Collaboration

• Greater effectiveness

Corporate Social Responsibility: (CSR)

management’s obligation to make choices and take actions that contribute to the welfare and interests of society, not just the organization.

• organizational decisions should consider the effect on society and on groups affected by the organization’s activities.

Stakeholders

any person or group within or outside the organization that has an investment in or interest in the organization’s performance.

• shareholders

• employees

• customers

• suppliers

• communities

Stakeholder Mapping

systematic way to identify the expectations, needs, importance, and power of stakeholders

• managers can use this to consider future decisions.

The Corporation’s Multiple-Stakeholder Purpose

serves multiple stakeholders. Corp is expected to consider the interests and effects of its decisions on groups beyond the orgs immediate financial interests.

The Green Movement and Environmental Responsibility

Driving Forces: Efforts to preserve the environment are influenced by:

• A shift in social attitudes

• The influence of social media and the internet

Greenwashing

company tries to portray itself as more environmentally minded than it actually is.

• misleading impression about an orgs environmental responsibility.

Sustainability

Ability to generate wealth with environmental responsibility while meeting the current and future needs of stakeholders and preserving the environment and society.

Triple Bottom Line: Measures

• Social performance

• environmental performance

• Financial performance

Triple Bottom Line: 3 P’s

People

Planet

Profit

People

Social Responsibility and stakeholder welfare

Planet

Environment resp and preservation

Profit

Financial performance and wealth generation

Benefit Corporation

for-profit organization whose stated purpose includes:

• creating a material positive impact on society

• considering the impact of all decisions on shareholders, employees, the community, and the environment

• voluntarily holding itself to high standards of accountability and transparency

B Lab

nonprofit organization that certifies businesses as B corps

Building an Ethical Organization: Values-oriented Approach

targets individuals’ internal desire to be ethical. Seeks to make ethical conduct part of the orgs cultures and employee’s everyday decision making

• meetings

• hiring processes

• orientation

Building an Ethical Organization: Ethical Leadership

Managers:

• model honesty and trustworthiness

• deal fairly with employees and customers

• ethically professionally and personally

Employees usually observe and often imitate managerial behavior.

Volunteerism

actively giving time and skills to a volunteer or charitable org.

Code of Ethics

formal statement of a company’s values concerning ethics and social issues.

Principle- based statements

Define fundamental values, company res, prod quality, and treatment of employees

Policy-based statement

Outline procedures to be used in specific ethical situations

Ethics Training

communicates the orgs ethical practices and policies. Can help employees understand code of ethics.

• through hiring, orientation, meetings

Ethical Structure

systems, positions, and programs a company can establish to implement ethical behavior.

Ethics Committee

group of execs appointed to oversee the orgs ethics

• ruling on questionable issues

• overseeing ethical matters

• disciplining violators

Chief Ethics Officer

comp exec who oversees all aspects of ethics and legal compliance

Whistle-Blowing

employee’s disclosure of illegal, unethical, or illegitimate practices by employer

• ethical safeguard, when employees identify serious misconducts

Values-oriented approach

Internal commitment to ethical behavior and organizational culture

• ethical leadership, honesty, trustworthiness, fairness, volunteerism

Structural Approach

formal systems and positions that implement and reinforce ethical conduct.

• codes of ethics, ethics training, ethics committee, chief ethics officers

How to analyze an ethical Problem

• identify the dilemma: which values, duties, in conflict

• identify the moral agent: who is resp making decision

• identify affected stakeholders: emp, cust, suppl, share

• Use stakeholder mapping: stakeholders needs, expectations

• Apply multiple ethical approaches: consider consequences, long-term interest

• check org expect: review code of ethics, policies

• consider personal and social pressures: examine self int, colleagues exp, leadership beh

• use practical test: whether com would accept the action

• choose and communicate the ethical action: apply rules fairly and consider

Entrepreneurship

Process of initiating a business venture, organizing resources, assuming risks, and receiving rewards

Entrepreneur

person who engages in entrepreneurship

Idealists

who envisions the world as it could or should be—guided by high standards, noble principles, or perfection—rather than focusing strictly on how things currently are.

Optimizers

leader, manager, or decision-maker who strives to find the best possible outcome by evaluating all available options, analyzing all available data, and maximizing efficiency, profit, or performance.

Hard workers

employees driven by high effort, diligence, and persistence. While traditionally viewed as top assets, modern management differentiates between productive hard work and unhealthy overwork.

Jugglers

a leader, project manager, or employee who excels at balancing multiple concurrent tasks, projects, priorities, and stakeholder demands without letting key deliverables drop.

Sustainers

a leader or employee focused on maintaining stability, consistency, operational continuity, and steady performance. While "innovators" create new products and "transformers" drive radical change, sustainers protect and optimize the core business.

Autonomy

A strong desire to be free to achieve independently

Entrepreneurial sacrifice

A willingness to give up time, comfort, or resources to build the venture.

High energy

The drive needed to manage the demands of a new business.

Need to achieve

• Motivation to excel and choose situations in which success is likely.

Self-confidence

Belief in one’s ability to succeed.

Locus of Control

The extent to which a person believes outcomes are controlled by personal actions rather than outside forces.

Minority, Immigrant, and Women-Owned Businesses

• more than 11 mill

• more than 2 trillion dollars

• twice as likely to start new businesses

Online and Mobile-App Start-Ups

• Find a market niche: specific group of cust whose needs are not fully met

• Create a prof website: est credibility and provide info ab the business

• Choose an appropriate domain name: select a name that supports the bus identity

• Know when to pivot: Change strategic direction when market feedback indicates org approach is not working

• Use social media: promote prod, gather feedback, build loyal com

Social Entrepreneurship

Entrepreneurship focused primarily on creating social value by solving social problems, with profit as a secondary purpose.

• bus skills, creativity, passion

Exam Point

he primary goal of a social entrepreneur is providing social benefits, not generating profits.

Benefit Corp

permitted in many states and supports businesses that pursue social purposes.

Launching a Start-Up

1. Starting with a business idea.

2. Writing a business plan.

3. Choosing a legal structure.

4. Arranging financing.

Business Plan

document describing the details of a proposed business before it opens. Planning forces the entrepreneur to consider the challenges and problems involved in starting and developing the venture.

• clear compelling vision

• realistic financial project

Sole proprietorship

• owned by one individual for profit

• east to est and subject to few legal requirements

• owner has total control and ownership

• unlimited liability

• financing may be difficult

Partnership

• two or more people

• formal agreement specifying resp, resource sharing

• unlimited liab

Corporation

• created by state and separate from its owners

• corp is resp for its own actions, limiting owner’s liab

• pays taxes on its income and provides continuity

• expensive and complex paperwork

• raise funds by selling stocks to investors

Debt Financing

borrowing money that must be repaid later

• fam and friends

• personal cc

• bank loans

• finance companies

• wealthy individuals

• potential customers

Equity financing

receiving funds in exchange for ownership in the company

Angel financing

Wealthy individuals provide personal funds and advice in exchange for an opportunity to benefit from the start-up.

Venture capital firms

Groups that invest in new or expanding businesses in exchange for ownership and potential profits.

Crowdfunding

Raising small amounts of capital from many investors, usually through the Internet and social media.

Business incubator

An organization or facility that provides shared office space, management support, and management or legal advice.

Virtual Incubator

Provides support without requiring entrepreneurs to work on-site.

Co-working facility

An open office environment shared by freelancers, telecommuting employees, and others without a regular office.

Franchising

A business arrangement in which the franchisor collects upfront and continuing fees and allows franchisees to use its brand, products, services, and processes.

Advantages

Management assistance, an established brand name, and national advertising.

Disadvantages

Limited control, franchisor control over prices and new products, expensive equipment requirements, high start-up costs, and continuing monthly payments.

Global Entrepreneurship

Major contributing factors include advances in technology, the rapid growth of the middle class in countries such as China and India, and the rise of female entrepreneurs.