Ch. 6 (Managerial Ethics)

Managers encounter day-to-day ethical challenges in such areas as:

• conflicts of interest

• sexual harassment

• customer dealings

• pressure to compromise on personal standards, and more

Personal level

Situations faced in our personal lives outside the context of our employment

Managerial and organizational levels –

• Workplace situations faced by managers and employees.

Industry or profession level

• A manager or organization might experience business ethics issues at the industry or

professional level.

Societal and global levels –

• Managers acting in concert through their companies and industries can bring about

constructive changes.

Managerial and organizational levels

Workplace situations faced by managers and employees

Industry or profession level

A manager or organization might experience business ethics issues at the industry or

professional level

Societal and global levels

Managers acting in concert through their companies and industries can bring about

constructive changes

Conventional Approach

Compare a decision, practice, or policy with society’s prevailing norms of

acceptability. This is the way conventional societies think.

Principles Approach

Be guided by principles or guidelines, anchored in moral philosophy, that

have been around for centuries. Examples include the principles of rights,

justice, utilitarianism, care, virtue, Golden Rule, and servant leadership

Ethical Tests Approach

Ethical tests are practical questions you might ask yourself that might

direct you to pursue ethical courses of action. Examples include the tests

of common sense; one’s best self; making something public (disclosure

rule); ventilation, purified idea, Big Four, gag test

Ethics Principle

A principle of business ethics is an ethical concept, guideline, or rule that assists

you in taking the ethical course

Teleological theory

Focuses on consequences or results of an action

Deontological theory

Focuses on duties, without regard to consequences

Aretaic theory

Focuses on the virtue of an action

Common Sense

If the proposed course of action violates your “common sense,” don’t do it. If it doesn’t pass the “smell” test, don’t do it

One’s Best Self

If the proposed course of action is not consistent with your perception of yourself at your “best,” don’t engage in it

Making Something Public

If you would not be comfortable with people knowing you did something, don’t do it. Don’t take a course of action if you think your grandma might disapprove.

Ventilation

Expose your proposed course of action to others’ opinions. Don’t keep your ethical dilemma to yourself. Get a second opinion.

Purified Idea

Don’t think that others in authority such as an accountant, a lawyer, or a boss can “purify” your proposed action by saying they think it is okay. It still may be wrong. You will still be held responsible.

Big Four

Don’t compromise your action or decision by tempting behaviors, such as greed, speed, laziness, or haziness.

Gag Test

If you “gag” at the prospect of carrying out a proposed course of action, don’t do it.

Behavior of superiors

the number one influence on moral climate

Behavior of one’s peers

the second influence; people do pay attention to what their peers in the firm are doing

Industry or professional ethical practices

ranked in the upper half; these context factors are influential

Personal financial need

ranked last

Bounded ethicality

occurs when managers and employees find that behaving ethically is difficult because of various organizational pressures

Conformity bias

the tendency people have to take their cues for ethical behavior from their peers, rather than exercising their own, independent judgment

Overconfidence bias

people may be more confident of their moral character than they have reason to be

Self-serving bias

people may process information in a way that supports their preexisting beliefs & self-interest

Framing

ethical judgments are affected by how an issue is posed; if posed as an “ethical” issue, they make more ethical decisions

Incrementalism

a predisposition toward the “slippery slope.”

Role morality

a tendency to use different ethical standards for different roles in life

Moral equilibrium

a tendency for people to keep an ethical scoreboard in their heads, and use this information when making future decisions, balancing decisions, and avoiding a moral “surplus.”

Ill-conceived goals

poorly set goals that encourage negative behaviors

Motivated blindness

overlooking the questionable actions of others when it is in one’s own best interest.

Indirect blindness

one holds others less accountable for unethical behaviors when they are carried out through third parties

Slippery slope

causes people not to notice others’ unethical behavior when it gradually occurs in small increments.

Overcoming values

the act of letting questionable behaviors pass if the outcome is good. This can occur when managers put more emphasis on results rather than on how the results are achieved

Three key elements that must exist if an ethical organizational culture is to

be developed and sustained:

1. The continuous presence of ethical leadership reflected by the board of directors, senior executives and managers.

2. The existence of a set of core ethical values infused throughout the organization by way of policies, processes and practices.

3. A formal ethics program which includes a code of ethics, ethics training, and an ethics officer.

Effective Communication of Ethical Messages requires:

• Written and verbal communication

• Non-verbal communication

• Candor – forthright, sincere, and honest

• Fidelity – be faithful to detail, accurate, avoid deception or exaggeration

• Confidentiality – exercise care in deciding what information to disclose to others. Trust can be shattered if confidences are breached.

Ethics program

1. Written standards of conduct

2. Ethics training

3. Mechanisms to seek ethics advice or information

4. Methods for reporting misconduct anonymously

5. Inclusion of ethical conduct in the evaluation of employee performance

6. Disciplinary measures for employees who violate ethical standards

7. A set a guiding values or principles

Code of Conduct

• A way of establishing standards of behavior and communicating them to

managers and employees.

• The single most important element of an ethics and compliance program.

• Virtually all major corporations have codes of conduct today.

• Many have worldwide codes or standards.

• Some codes of conduct are designed around stakeholders, others on conduct

Ethics audit

Intended to carefully review such ethics initiatives as ethics programs, codes of

conduct, hotlines, and ethics training programs

Sustainability Audit

Helps to identify sustainability issues within an organization.

Fraud Risk Assessment

Review processes that identify and monitor conditions that may pertain to the

company’s exposure to compliance/misconduct risk and to review methods for

dealing with concerns.

Corporate Transparency

A quality, characteristic, or state in which activities, processes, practices, and

decisions that take place in companies become open or visible to the outside

world

The degree to which an organization:

• provides public access to information.

• accepts responsibility for its actions.

• makes decisions more openly.

• establishes incentives for leaders to uphold standards.

The Sarbanes-Oxley Act

• Companies are required to protect whistle-blowers without fear of retaliation.

• It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit.