Ethics and Organizational Behavior

Chapter Four: Responding to Ethical and Social Environments

Understanding Ethics

  • Definition of Ethics: An individual's beliefs regarding whether a behavior, action, or decision is right or wrong.

  • Personal Ethics vs. Organizational Ethics:

    • Each individual possesses personal ethics.

    • Organizations, as collectives, do not possess ethics in the same way; they are a sum of individual beliefs.

Promoting Ethical Behavior

  • Encouraging Ethical Conduct: Organizations must promote positive ethical behavior among employees and deter unethical behavior.

    • Unethical behavior is described as any action that does not conform to generally accepted social norms.

  • Managerial Ethics:

    • Addresses the ethical standards governing both the employee's behavior towards the organization and vice versa.

Ethical Expectations

  • Employee Expectations:

    • Employees are expected to provide:

    • Conflict of interest disclosures.

    • Maintain secrecy and confidentiality.

    • Exhibit honesty.

  • Organizational Expectations:

    • Organizations must uphold:

    • Ethical hiring and termination practices.

    • Fair wages and safe working conditions.

    • Privacy and respect for employees.

Ambiguity in Ethics

  • Complexities of Advertising and Promotion:

    • The ethical management of conflicts between employee and organizational disclosures.

  • Economic Agents Affected:

    • Consumers, competitors, stockholders, boards of dealers, unions, and suppliers must be considered in ethical practices.

  • Product Transparency:

    • Ensuring products delivered match what is disclosed to stakeholders.

Managing Ethical Behavior

  • Modeling Desired Behavior:

    • Leaders (CEO, CFO, etc.) should exemplify ethical behavior that employees can observe and emulate.

  • Organizational Justice:

    • Four types of justice are essential in ensuring fairness within organizations:

    1. Distributive Justice:

      • Perceptions of fairness in reward distribution.

    2. Procedural Justice:

      • Fairness in the processes that lead to outcomes, including promotions and raises.

    3. Interpersonal Justice:

      • Fairness in treatment by others within the organization.

    4. Informational Justice:

      • Fairness concerning the information used in decision-making processes.

Ethical Norms

  • Key Norms in Ethics:

    • Utility: Does the action optimize outcomes?

    • Rights: Does the action respect everyone's rights?

    • Justice: Is the action fair across all parties?

    • Caring: Does the action reflect responsibility to others?

Ethical Leadership

  • Sarbanes-Oxley Act (2002):

    • Mandates that CEOs and CFOs personally certify the accuracy and fairness of financial disclosures.

    • This law arose from issues of accountability among corporate leaders regarding financial management.

  • Corporate Governance:

    • Board of Directors must maintain independence to minimize conflicts of interest.

    • Ensures decisions prioritize shareholders' interests and effective management.

Information Technology and Privacy

  • Emerging Ethical Concerns:

    • Organizations must protect the privacy of consumer and employee information amidst growing digital concerns.

  • Ethical Use of Company Resources:

    • Using company property (like laptops) for personal gain must be considered from an ethical standpoint.

Social Responsibility Overview

  • Definition:

    • The obligation of an organization to enhance the social context in which it operates.

  • Stakeholders:

    • Include customers, employees, investors, government agencies, and communities affected by business practices.

Arguments For and Against Social Responsibility

  • For Social Responsibility:

    • Businesses responsible for the problems they create should also assist in solving them.

  • Against Social Responsibility:

    • Businesses may gain excessive power when they become involved in social issues, leading to conflicts over authority.

Approaches to Social Responsibility

  • Obstructionist:

    • Organizations do the bare minimum required.

  • Defensive:

    • Only comply with legal requirements, with no additional efforts.

  • Accommodative:

    • Meet legal requirements and do additional activities, like community donations.

  • Proactive:

    • Actively seeks out opportunities to contribute positively to the community, far exceeding basic obligations.

Government Influence on Organizations

  • Types of Regulation:

    • Direct Regulation: Laws and regulations that organizations must adhere to strictly.

    • Indirect Regulation: Incentives provided by governments, such as tax breaks for organizations creating jobs.

  • Lobbying and Political Action Committees (PACs):

    • Organizations lobby for representation in legislation and may engage in political donations to influence policy decisions.

Whistleblowing

  • Definition:

    • Reporting unethical or illegal activities within an organization, often conflicting with confidentiality agreements.

  • Perspectives on Whistleblowing:

    • Seen as ethical by some for providing critical information to the public but may also be seen as unethical due to potential harm or self-serving motives.

Evaluating Social Responsibility

  • Corporate Social Audit:

    • A formal assessment of an organization's social performance and effectiveness in achieving social goals.

    • Many companies report on their social and environmental responsibility in their annual reports.

Final Thoughts on Law and Ethics

  • Reflections on Law and Ethics:

    • Can illegal behavior ever be ethical? Is all legal behavior inherently ethical?

  • Support for Socially Responsible Companies:

    • Discussion on valuable causes that deserve support from businesses based on ethics and social responsibility.