MGT 101 - Ethics and Social Responsibility

[Definition of Ethics] Business Ethics

• a branch of applied ethics; it studies the relationship of what is good and right for business (Hoffman, Fredrick & Schwartz, 2014)

• to understand this, you must first recognize that most people do not have specific definitions they use to define ethics-related issues

[Definition of Ethics] precise

ethics is difficult to define in a _____ way

terms that are often used interchangeably

• morals

• principles

• values

• ethics

[Often Interchangeable Terms] Morals

• refers to a person’s personal philosophies about what is right and wrong

• personal or singular

• relate to you and you alone

[Often Interchangeable Terms] Principles

• specific and pervasive boundaries for behavior that should not be violated

• often become the basis for rules

• some examples include:

  • human rights

  • freedom of speech

  • fundamentals of justice

[Often Interchangeable Terms] Values

• enduring beliefs and ideals that are socially enforces

• several desirable or ethical values for business today are teamwork, trust, and integrity

• often based on organizational or industry best practices

[Often Interchangeable Terms] Ethics

• defined as behavior or decisions made within a group’s values—decisions made in the course of business by groups of people that represent the business organization

[Often Interchangeable Terms] Business Ethics

comprises organizational principles, values, and norms that may originate from individual, organizational statements, or from the legal system that primarily guide individual and group behavior in business

Daft (2016)

According to him, ethics can be more clearly understood when compared with behaviors governed by laws and by free choice. Human behavior falls into three categories.

Three Categories of Human Behavior

[Three Categories of Human Behavior] Domain of Codified Law

• values and standards are written into the legal system and enforceable in the courts

• in this area, lawmakers set rules that people and corporations must follow in a certain way, such as obtaining licenses for cars or paying corporate taxes

[Three Categories of Human Behavior] Domain of Ethics

• between the domains of codified law and free choice lies this area

• this domain has no specific laws, yet it does have standards of conduct based on shared principles and values about moral conduct that guide an individual or company

[Three Categories of Human Behavior] Domain of Free Choice

• at the opposite end of the scale and pertains to behavior about which the law has no say and for which an individual or organization enjoys complete freedom

• a manager’s choice of where to eat lunch or a music company’s choice of the number of CDs to release is an example of free choice

Ethical Dilemma

• presents itself in various ways to a manager

• “most involve a conflict between the needs of the part and the whole—the individual versus the organization or the organization versus the society as a whole”

Factors that Determine Ethical or Unethical Behavior

1. his or her stage of moral development and other moderating variables, including individual characteristics

2. the organization’s structural design

3. the organization’s culture

4. the intensity of the ethical issue

[Factors that Determine Un/Ethical Behavior] Stage of Moral Development

divided into three levels, each having two stages

[Factors that Determine Un/Ethical Behavior] Three Stages of Moral Development

• Pre-conventional Level

• Conventional Level

• Principled Level

[Stage of Moral Development] Pre-Conventional Level

the choice between right and wrong made by a person is based on personal consequences from outside sources, such as physical punishment, reward, or exchange of favors

1. sticking to rules to avoid physical punishment

2. following rules only when doing so is in your immediate interest

[Stage of Moral Development] Conventional Level

• ethical decisions rely on maintaining expected standards and living up to the expectations of others

• meeting social and interpersonal obligations is important

• work group collaboration is the preferred manner for accomplishment of organizational goals

3. living up to what is expected by people close to you

4. maintaining conventional order by fulfilling obligations to which you have agrees

[Stage of Moral Development] Principled Level

• individuals define moral values apart from the authority of the groups to which they belong or society in general

• individuals are guided by an internal set of values and standards and will even disobey rules or laws that violate these principles

• internal values become more important than the expectations of significant others

5. valuing rights of others and upholding absolute values and rights regardless of the majority’s opinion

6. following self-choses ethical principles even if they violate the law

[Stage of Moral Development] autocratic or coercive

• managers at the pre-conventional level would use this leadership style

• employees oriented toward dependable accomplishment of specific tasks

[Stage of Moral Development] interpersonal relationships and cooperation

managers at the conventional level, use a leadership style that encourages these

[Factors that Determine Un/Ethical Behavior] Individual Characteristics

• Robbins & Coulter (2016) identified two if this that play an important rile whether a person behaves ethically:

  • values

  • personality

[Individual Characteristics] Values

• according to Robbine & Coulter (2016), a person comes to an organization with a relatively entrenched set of these which represent basic convictions of what is right and wrong

• develop from a young age based on what we see and hear from her parents, teacher, friends, and others

• people always base their decisions on their own of this principles of right and wrong

• this and principles are generally learned through the socialization process with family members, social groups, and in their formal education

• good personal set of these have been found to decrease unethical practices and increase positive work behavior

[Individual Characteristics] ego strength and locus of control

two personality variables that have been found to influence an individual’s actions according to his or her beliefs about what is right or wrong

[Individual Characteristics] ego strength

• measures the strength of a person’s convictions

• people with high of this are likely to resist impulses to act unethically and instead follow their convictions

[Individual Characteristics] locus of control

the degree to which people believe they control their own fate

[Individual Characteristics] internal locus of control

• people with this believe they control their own destinies

• they’re more likely to take responsibility for consequences and rely on their own internal standards of right and wrong to guide their behavior

• they’re also more likely to be consistent in their moral judgements and actions

[Individual Characteristics] external locus of control

• people with this believe what happens to them is due to luck or chance

• they’re less likely to take personal responsibility for the consequences of their behavior and more likely to rely on external forces

[Factors that Determine Un/Ethical Behavior] Structural Variables

• “An organization’s structural design can influence whether employees behave ethically.”

• those structures that minimize ambiguity and uncertainty with formal rules and regulations and those that continuously remind employees of what is ethical are more likely to encourage ethical behavior

[Structural Variables] other structural variables that influence ethical choices

• goals

• performance appraisal systems

• reward allocation procedures

[Factors that Determine Un/Ethical Behavior] Organization’s Culture

• the content and strength of this also influence ethical behavior

• consists of the shared organizational values

[Organization’s Culture] corporate culture

• “set of values, norms, and artifacts, including ways of solving problems that members (employees) of an organization share

• “the shared beliefs top managers in a company have about how they should manage themselves and other employees, and how they should conduct their business(es)”

[Factors that Determine Un/Ethical Behavior] Issue Intensity

• “perceived relevance or importance of an ethical issue to an individual or work group”

• “reflects the ethical sensitivity of the individual or work group that triggers the ethical decision-making process”

[Issue Intensity] 6 Characteristics that Determine Issue Intensity

1. greatness of harm

2. consensus of wrong

3. probability of harm

4. immediacy of consequences

5. proximity to victim/s

6. concentration of effect

• the larger the value/effect of these characteristics, the greater the issue intensity or importance

• when an ethical issue is important, employees are more likely to behave ethically

[Criteria for Ethical Decision-Making] normative strategy

according to Daft (2016), “managers faced with tough ethical choices often benefit from a _____ (one based on norms and values) to guide their decision making”

[Criteria for Ethical Decision-Making] normative ethics

uses several approaches to describe values for guiding ethical decision making

[Criteria for Ethical Decision-Making] 4 Normative Ethics Approaches

• utilitarian approach

• individualism approach

• moral-rights approach

• justice approach

these approaches are relevant to managers

[Criteria for Ethical Decision-Making] Utilitarian Approach

• espoused by the nineteenth century philosophers Jeremy Bentham and John Stuart Mill

• holds that moral behavior produces the greatest good for the greatest number

• under this approach, a decision-maker is expected to consider the effect of each decision alternative on all parties and select the one that optimizes the satisfaction for the greatest number of people

[Utilitarian Approach] utilitarian

according to Hoffman et al. (2014), “a _____ would compromise his utilitarianism of he allowed principles of justice which might conflict with the maximization of happiness (or more generally of goodness, should he be an “ideal” _____)”

[Criteria for Ethical Decision-Making] Individualism Approach

• contends that “acts are moral when they promote the individual’s best long-term interests"

• calculates the best long-term advantage to themselves as a measure of a decision’s goodness

• the action that is intended to produce a greater ratio of good to bad for the individual compared with other alternatives is the right one to perform

[Individualism Approach] self-direction

individual _____ is paramount, and external forces that restrict this should be severely limited

[Criteria for Ethical Decision-Making] Moral-Rights Approach

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

• “thus, an ethically correct decision is one that best maintains the rights of those affected by it”

[Moral-Rights Approach] 6 Moral Rights that Should be Considered During Decision-Making

1. the right of free consent

2. the right to privacy

3. the right to freedom of conscience

4. the right of free speech

5. the right to due process

6. the right to life and safety

[Moral-Rights Approach] the right of free consent

individuals are to be treated only as they knowingly and freely consent to be treated

[Moral-Rights Approach] the right to privacy

individuals can choose to do as they please away from work an have control of information about their private life

[Moral-Rights Approach] the right of freedom of conscience

individuals may refrain from carrying out any order that violates their moral or religious norms

[Moral-Rights Approach] the right of free speech

individuals may criticize truthfully the ethics or legality of actions of others

[Moral-Rights Approach] the right to due process

individuals have a right to an impartial hearing and fair treatment

[Moral-Rights Approach] the right to life and safety

individuals have a right to live without endangerment or violation of their health and safety

[Criteria for Ethical Decision-Making] Justice Approach

• holds that “moral decisions must be based on standards of equity, fairness, and impartiality”

[Justice Approach] 3 Types of Justice that are of Concern to Managers

• distributive justice

• procedural justice

• compensatory justice

[Justice Approach] Distributive Justice

• requires that different treatment of people not be based on arbitrary characteristics

• individuals who are similar in ways relevant to a decision should be treated similarly

• thus, women and men should not receive different salaries if they are performing the same job

[Justice Approach] Procedural Justice

• requires that rules be administered fairly

• rules should be clearly stated and be consistently and impartially enforced

[Justice Approach] Compensatory Justice

• argues that individuals should be compensated for the cost of their injuries by the party responsible

• individuals should not be held responsible for matters over which they have no control

Encouraging Ethical Behavior

1. employee selection

2. code of ethics

3. ethical leadership

4. job goals and performance appraisal

5. ethics training

6. independent social audits

7. protective mechanisms

[Encouraging Ethical Behavior] employee selection

• the selection process should be viewed as an opportunity to learn about an individual’s level of moral development, personal values, ego strength, and locus of control

• however, a carefully designed selection process isn’t foolproof and, even under the best circumstances, individuals with questionable standards or right and wrong may be hired—that means having other ethics control in place

[Encouraging Ethical Behavior] code of ethics

• a formal statement of an organization’s values ant he ethical rules i expects employees to follow

• a popular choice for reducing uncertainty about what is and is not ethical for employees

[Encouraging Ethical Behavior] ethical leadership

• doing business ethically requires a commitment from managers at all levels, but especially the top level

• “_____ creates an ethical culture”

[Encouraging Ethical Behavior] job goals and performance appraisal

• Robbins & Coulter (2016) cautioned against unrealistic goals as employees might do everything unnecessary, even do unethical acts to meet those goals

• “if performance appraisal focus only on economic goals, ends will begin to justify means. to encourage ethical behavior, both ends and means should be evaluated.”

• for example, a manager’s annual review of employees might include a point-by-point evaluation of how their decisons measured up against the company’s code of ethics as well as how well goals were met

[Encouraging Ethical Behavior] Ethics Training

• to encourage ethical behavior, most organizations are setting up seminars, workshops, and similar programs

• a primary concern is whether ethics can be taught

[Encouraging Ethical Behavior] Independent Social Audits

• “the fear of being caught can be an important deterrent to unethical behavior”

• evaluates decisions and management practices in terms of the organization’s code of ethics

• can be regular evaluations or

[Encouraging Ethical Behavior] Protective Mechanisms

• employees who face ethical dilemmas need this so they can do what’s right without fear of reprimand

• an organization might designate ethical counselors for employees facing an ethical dilemma; these advisors also might advocate the ethically “right” alternatives

• other organizations have appointed ethics and compliance officers who design, direct, and modify the organization’s ethics/compliance programs as needed

• in fact, many organizations have raised the visibility of their compliance officers, even to the point of being a direct report to the CEO