Ethical Leadership Final

Definition of corporate culture

o   System of shared meaning held by an organization’s members that distinguishes the organization from others.

o   Also: Values, beliefs, assumptions and norms that govern how we behave, defines the rules of the game and sense of identity, social glue, consist of the dominate culture and subcultures.

·   Implication of corporate culture for business ethics

o   Employee engagement is based on the culture

o   Ethical or unethical behavior is learned from others

o   People operate in a group and will look up to role models and conform to the norms and expectations.

o   Business decisions are made by groups not individuals and are based on business goals rather than personal ones.

·   Strong versus weak culture

o   Strong Culture

§  Values widely shared

§  Members know what is important

§  Most employees can tell stories about company history/heroes

§  Employees strongly identify with culture

§  Strong linkage between shared values and behavior.

o   Weak Culture

§  Values shared by a few, usually top management

§  Members not very clear about what is important

§  Employees possess little knowledge of company history or heroes

§  Employee have little identification with culture

§  Little connection between shared values and behaviors.

·   Culture as an asset or liability

o   Asset

§  Unanimity of purpose

§  Organizational cohesiveness

§  Loyalty & meaning

§  Organizational commitment

§  Positive impact on customer satisfaction

o   Liability

§  Institutionalization

§  Barriers to change

§  Barriers to diversity

§  Toxicity & dysfunctions

§  Barriers to M&A via lacking cultural compatibility

·   Two matrixes to categorize corporate culture

o   Strong culture and culture as an asset is green

o   Strong culture and cultures as a liability is red

o   Weak culture and culture as an asset or liability is a washed out area

·   Compliance versus values-based ethical cultures

o   Compliance based ethical cultures are designed to meet legal regulatory requirements concerning ethics. It is more punishment and rule following (defensive and legalistic)

§  A legalistic approach to ethics with codes of conduct as their focus; revolves around risk management; and lack of long-term focus on values and integrity

o   Values-based ethical cultures incorporate business ethics as part of their corporate culture, values and DNA to create a competitive advantage.

§  Relies on a explicit mission statement that defines core values of the firm and how customers and employees should be treated. (top down approach with a codes of ethics that gives a standard of conduct)

·   Best practices for an ethical culture

o   Ethical leadership (strong moral tone at the top)

o   Existence of set core ethical values infused throughout the organization by way of polices, processes and practices

o   More focus on ethical principles than compliance

o   Make ethics a part of the organization values and decision making process.

·   Four Organizational Culture Types

§  Clan--collaborative

§  Adhocracy--creative

§  Hierarchy---controlling

§  Market—competing 

o   Apathetic—minimal concern for people or performance

o   Caring—high concern for people, minimal concern for performance

o   Integrative—high concern for people and performance.

• Exacting culture - caring about the performance but not people

·   Institutionalizing ethics through various elements of corporate ethics programs

o   Proactive and strategic approach; align towards an ethical culture, improve relationships with stakeholders; incorporate ethics in corporate strategy, daily management, and corporate culture; CSR and ethical decision making embedded in daily decision-making, effective system of rewards and sanctions for ethical/unethical behavior; Business ethics part of core values; failure to balance stakeholder interest can result in failure to maximize shareholders’ wealth.

·   Difference between legal compliance and voluntary ethics

o   Legal compliance: legalistic approach, risk management, help employees understand rules for identified ethical risk.

o   Voluntary ethics: values-based, teach employees to navigate ethical gray areas, spark ethical reasoning.

o   Integrity based ethics are programs for building ethical organizations that combine a concern for law with an emphasis on managerial responsibility for ethical behavior. (aka emphasis on employee responsibility for ethical conduct)

·   Main sources for legal compliance

o   Minimum standards for responsible behavior

o   Society’s codification of what is right and wrong

·   Main elements of corporate ethics program

o   Written standards of conduct, ethics training, mechanisms to seek ethics advice, methods for reporting misconduct anonymously, inclusion of ethical conduct in evaluation of employee performance, disciplinary measures for employees who violate ethical standards, and a set of guiding values or principles

·   Main elements of a well-written code of conduct*** [not 100% confident on this one]

o   Show employees and prospective employees that the business is both responsible and ethical

o   Demonstrate to customers that the company values integrity

o   Help the company communicate expectations for its employees

o   Show that discipline is fair

o   Give the company culture an ethical foundation

·   Reasons why codes of conduct fail to deliver ethical behavior

o   Code not promoted and not read by employees; Code not easily accessible; Code written too legalistically and not understood by majority of employees; Code written too vaguely; Top management does not refer to code in body or spirit; Corporate culture eats written documents for breakfast; Pressure from peer and supervisor; Unrealistic performance expectations.

·   Difference between compliance-based ethics and integrity-based ethics programs

o   Compliance-based ethics are programs for building ethical organization that have the goal of preventing, detecting, and punishing legal violations (aka avoid legal sanctions)

o   Integrity based ethics are programs for building ethical organizations that combine a concern for law with an emphasis on managerial responsibility for ethical behavior. (aka emphasis on employee responsibility for ethical conduct)

·   Concept and business case for DEIB

o   Diversity is a fact (being invited to the party); Inclusion is  a conscience behavior (being asked to dance); Belonging is dancing like no one is watching.

o   DEIB is a company’s mission, strategies, and practices to support a diverse workplace and leverage the effects of diversity to achieve a competitive business advantage. [Equality is equal access to opportunities]

·   Financial business case for D&I

o   Business need to acquire top talent, Diversity causes a potential advantage for business. Growing pressure on companies from customer, investors, and stakeholder to advance the social good.

o   Aka, customers expect it, shareholder require it, competitors are actively pursing it. Failure to recruit and retain the full range of talent available puts companies at risk of marginalization

·   What companies can do to drive DEIB

o   Anchor DEIB in organization; ensure senior leaders are champions, Foster an inclusive culture; Provide platform for underrepresented groups; Hire for diverse talent; Develop, engage, and retain diverse talent; Enhance accountability

·   Concepts of sexual harassment

o   Sexual harassment: any repeated, unwanted behavior of a sexual nature perpetrated upon one individual by another

o   Hostile work environment: three criteria must be met 1) the conduct was unwelcome 2) the conduct was severe, pervasive and regarded by claimant as so hostile or offensive as to alter his or her conditions of employment 3) the conduct was such that a reasonable person would find it hostile or offensive.

o   Quid Pro Quo: a favor or advantage granted or expected in return for something

·   Definition of leadership vs management

o   Leadership: focus on goals, sell it take risk, encourage, go against the grain, motivate, break the rules, inspire trust, foster ideas

o   Management: focus on tasks, tell it, minimize risks, instruct, go with the flow, approve, follow the rules, expect control, assign tasks

o   A combination of the two will accomplish a goal, mobilize resources, explain vision.

·   Leadership core competencies and business case for good leadership

o   Inspire commitment, leading employees, strategic planning, change management, employee development, self-awareness.

o   Integrity is a top characteristic

o   Vision, Self, People, Function

o   Think strategically, communicate persuasively, act decisively, manage self, manage people, manage work

·   Goleman six leadership styles

o   Commanding; Visionary, Affiliative; Democratic; Pacesetting; Coaching

·   Habits and behaviors of ethical leaders

o   Passion to do right; Morally/ethically proactive; consider all stakeholders; strong personal ethical character; obsession with fairness; role models; principled decision-making; integrate ethics wisdom; transparent; holistic view of organization’s ethical culture.

o   Role model integrity; inspire ownership and accountability, champion the importance of ethics; establish productive relationships; be a responsible steward of company assets, define structure, systems, and processes in support of business ethics, resist pressure to act unethically, develop an ethical climate as part of the corporate culture, develop own moral compass.

·   Unethical—apathetic—ethical leadership*** New Addition

o   Unethical leader: ego-centric and will often do whatever it takes to achieve personal and organizational objectives.

o   Apathetic leaders: not necessarily unethical, but they care little for ethics within the company

o   Ethical leaders: include ethics at every operational level and stage of the decision making process. 

·   Groupthink, partisan and tribal mind

o   Desire to belong to a group (“tribe”)

§  Allow open discussions and encourage criticism, explore all sides of the topic, document the feedback, bring in appropriate experts, have another team review your output.

o   Confirmation bias

o   Source monitoring

·   Empowering employees

o   Leaders must encourage their employee to make ethical decisions and take responsibility for their actions

·   Using the “RADAR” model

o   Recognize ethical issue

o   Avoid misconduct whenever possible

o   Discover ethical risk areas

o   Answer stakeholder concerns when an ethical issues comes to light

o   Recover from a misconduct disaster by improving upon weakness in the ethics program.

·   Define EI

o   Emotional intelligence: the ability to manage themselves and their relationship with others effectively, characterized by self-awareness, self-control, and relationship building

o   Emotionally Intelligent leaders: Understand themselves, and manage themselves. Empathize with others and Collaborate well. Inspire and motivate and Deal with difficult situations.

·   IQ vs. EQ

o   IQ: Visual processing; working memory; fluid & quantitative reasoning [cannot be raised nor learned]

o   EQ identifying emotions, relating to others, social communication [possible to raise and can be learned]

·   12 key EI competencies according to Goleman

o   Self awareness

§  Emotional self-awareness

o   Self Management

§  Emotional self-control

§  Adaptability

§  Achievement Orientation

§  Positive Outlook

o   Social Awareness

§  Empathy

§  Organizational awareness

o   Relationship Management

§  Influence

§  Coach and Mentor

§  Conflict Management

§  Teamwork

§  Inspirational leadership

·   Concepts of “mindsets and behaviors” as deep-rooted beliefs that will shape ethical leadership choices

o   Behaviors are what people see above the surface. Mindset is the things people can’t see below the surface such as what we say and believe. Our mindset floats to the surface. Understand your basic assumptions and big beliefs

·   How latest technological developments has impacted business ethics (AI & algorithmic ethics, data protection and data governance, automation of robotics, next generation geonomics & biotechnology, market domination and power of “big tech”.

o   AI: needs to to be programmed with ethical parameters, can contribute to job loss while also creating new jobs, the use of AI can create unintended biases.

o   Big Data: insights from big data can inform business strategies, concern for consumer privacy and how data should be shared/used in business, cookies store information, rights to be forgotten in the EU.

o   Biotechnology: what are the ethical implication of genetic manipulations and the exploitation of biological processes for industrial and other purposes. Ethical issues are biohacking, eugenics, bioterrorism, biotechnology price inequity, etc.

o   Digital divide—varying access to technology across social, geographical, and geopolitical groups.

·   Concept of creating “shared values”

·   Why global business ethics differ from national ones

o   It is hard to reach an overarching standard of ethics when so many different, cultures and nations approach different ethically issues differently.

·   The role of MNCs in global business

o   MNC: public companies that operate on a global scale without significant ties to any one nation or country.

o   Ethical issues: product safety, plan safety, advertising practices, HR managment, Human rights, Environmental problems, Business practices.

·   What is the best way to manage business ethics globally with conflicting home country and host country moral norms

o   Conflicts of Relative Development: would the practice be acceptable at home if my country was in the same stage of economic development?

o   Conflicts of Cultural Tradition

§  Is it possible to conduct business successfully in the host country without undertaking the practice?

§  Is the practice in question a violation of core human value?

·   Ethical imperialism vs cultural relativism

o   Ethical imperialism states the cultural/moral standards of home country trump those of host country

o   Ethical relativism states that the ethical/cultural/moral standards of the host country trump those of the home country

o   You want a mix of home and host country standards.

·   10 global principles for ethical business conduct

o   Create global codes of conduct and link ethics will global strategy

o   Respect human rights and treat corporate values and stands or conducts as absolutes

o   Design and implement conditions of engagement for suppliers and customers

o   Provide safe products and create value for customers

o   Provide equal opportunity, safely, and fair compensation for employees

o   Suspension of business activities in certain countries

o   Create ethical impact statements and audits

o   Build trust in all stakeholders’ relationship and support economic viability of all stakeholders

o   Require transparency and accountability in all relationships.

o   Be mindful and responsible in relating to communities where companies operate.

·   “Making moral management actionable”

Midterm Review

·   Define ethical person

o   An individual who continually works toward aligning their behaviors through a clearly considered set of values, with the intention to benefit the greater good of society while reflecting a critical self-awareness and incorporation of multiple perspectives and despite any contextual constraints will make the same decision in every situation

·   Define ethical issue

o   When a matter has both aspects of right and wrong. Choose among several actions that must be evaluated as right or wrong, ethical or unethical.

·   Define ethical dilemma

o   When you can choose between several wrong or unethical decisions

·   Business case for organizational ethics

o   Avoiding penalties and fees, lawsuits, harsher government legislation and regulation; cost of taking corrective action, reputation and public image, employee recruitment, retention, engagement and morale; consumer loyalty, Shareholder loyalty and support of other stakeholders; purpose-driven entrepreneurship as a source of competitive advantage.

·   Development of business ethics over time

o   1960s workers responding to inequity and power

o   1970s Consumers want more from BIG business

o   1970s-1980s the role of business in our society is questioned (CSR)

o   1980s Business tried to police itself, seeking stakeholders to help ID what is important

o   1990s Significant corporate scandals

o   2000s the role of business in our culture is questioned again….

o   2000s New government regulation and “guidelines are introduced [FSGO, SOX, Dodd Frank]

o   2010 and 2020 Business seeks to create value from good ethical best practices

·   Sources of ethical norms

·   Understand and apply different ethical theories

·   Kohlberg’s model of moral development

·   Different ethics violations

·   Reasons for unethical behavior personally vs business context

·   Psychology of deception

·   Evaluation of utilitarianism as the most used ethical principle in business.

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·   Ethical decision making framework

·   Explicit and implicit bias

o   Implicit bias: attitudes or stereotypes that impact our understanding, actions and decisions in an unconscious manner.

o   Explicit bias: attitudes or stereotypes that we have a person or group that we consciously endorse.

·   Phycological traps in ethical decision making

o   Self-serving bias—see the information to support their beliefs

o   Conformity bias—follows the crowd

o   Framing—how is the issued posed?

o   Incrementalism—predisposition toward the “slippery slope”

o   Role morality—different ethical standards based on role.

o   Moral equilibrium—keeping an ethical scoreboard to avoid a moral surplus

o   Overconfidence bias—put a high confidence in their moral character than should be given

o   Ill-conceived goals—poorly set goals that encourage negative behaviors

o   Motivated blindness—ignore questionable actions when it is in their own self-interest

o   Indirect blindness—third parties not as accountable for unethical behaviors

o   Slippery slope—not notice unethical behavior when it gradually occurs in small increments

o   Overcoming values—letting questionable behaviors pass if the outcome is good (results rather than how results are achieved)

o   Bounded ethically—hard to behave ethically because of various organizational pressures.

·   Moral relativism 

o   The idea that there is no universal or absolute set of moral principles

·   Social group relativism

o   Beliefs and values are understood within the context of specific social groups

·   Culture relativism

o   The theory that beliefs, customs and morality exist in relation to the particular culture from which they originate and are not absolute.

·   Role relativism

o   The theory that beliefs and values will differ based on the role you hold.

·   Naïve/individual relativism

o   The theory that believes, customs and morality exists from the viewpoint of each individuals morals and ideals.

·   Define CSR

o   Corporate Social Responsibility is decision makers taking morally correct actions that genrally promote their own interests and those of their firms.

·   Four components of CSR

·   Pros (Levitt) and cons (Freidman) regarding CSR

·   Development of CSR and different stages of CSR

·   CSP, CC, and Triple Bottom Line

o   Corporate Social Performance: Emphasizes, Outcomes, Results

o   Corporate Citizenship: views companies as citizen and all this implies. Embraces all the facets of corporate social responsibility, responsiveness, and sustainability

o   Triple Botton Line: Economic/Environmental/Social [People/Planet/Profit]. CSR as an opportunity to create value, gain a competitive advantage, and address some of the world’s biggest challenges.

·   ESG/CSR with teeth

·   Main elements of environment, social and governance pillar

·   Definition and development of stakeholder approach and management

·   Different stakeholder groups and stakeholder issues

·   Primary vs secondary stakeholders

·   Six steps of strategic and inclusive stakeholder management

·   Root causes and drives for climate change

o   CO2 emission caused by industrialization and rapid population growth is increasing the amount of greenhouse gases in the atmosphere and thus causing global warming.

·   Definition of sustainability

Sustainability in business refers to practices that meet current needs without compromising future generations' ability to meet theirs.

·   Climate action by main stakeholders: government, investors, individuals, and business

o   Investors: Track climate risk, engage with the board, fund the low-carbon future

o   Individuals: practice sustainable consumer spending, make sustainability a factor for choosing an employer.

o   Business: Embrace the new sustainability reality, Develop a low-carbon strategy, climate-proof your operations, engage honestly with stakeholders, disclose your output and sustainability efforts, scrutinize your supply.

o   Government: Carbon tax, increased regulation concerning business impact on ESG, oversight organization for business sustainability.

·   Business response to sustainability and strategic implementation of environmental responsibility and sustainability strategies