Individual & Managerial Ethics Explained

Individual Ethics in Organizations

• Ethics are an individuals personal beliefs about whether a behavior, action, or decision is right or wrong.
• Ethical behavior conforms to generally accepted social norms.
• Unethical behavior does not conform to generally accepted social norms.
• An individual's ethics are formed by a combination of values, morals, family, events, and peers.

Managerial Ethics

• Managerial ethics are standards of behavior that guide individual managers in their work.
• How an organization treats its employees involves hiring, firing, wages, work conditions, privacy, and respect.
• How employees treat the organization includes conflicts of interest, secrecy, confidentiality, and honesty.
• How employees and the organizations treat other economic agents such as customers, competitors, stockholders, suppliers, dealers, and unions, are all elements of managerial ethics

Ethics in an Organizational Context

• Unethical behavior most often occurs in a conducive organizational context.
• Peers, top managers, and culture each contribute to an ethical context.
• Managers may consider unethical actions under pressure.

Managing Ethical Behavior

• Emphasizing ethical behavior takes many forms but must start with top management.
• Committees and training are common options to support ethical behavior
• Creating ethics codes is a common option for organizations that highlights a formal, written statement of a company's values and ethical standards.
• Applying moral judgement involves gathering the relevant factual information; determining the most appropriate moral values; then making an ethical judgement based on the rightness or wrongness of the proposed activity or policy.
• Ethical norms include the utility of making sure the act optimizes outcomes; and the rights of those involved are respected; justice and fairness is consistent; and there is caring and consideration based on other's needs.
• Maintaining organizational justice includes perceptions in the organization regarding fairness.
• The four types of organizational justice are distributive, procedural, interpersonal, and informational.
• Distributive justice highlights people’s perceptions of the fairness with distribution of rewards.
• Procedural justice refers to an individual's perceptions of the fairness used to determine outcomes.
• Interpersonal justice includes the fairness that people see in how they are treated by others.
• Informational justice highlights the perceived fairness of information used for decisions.

Emerging Ethical Issues

• Ethical leadership involves The Sarbanes-Oxley Act of 2002 which enforced that CEOs and CFOs vouch for the truthfulness of their firm's financial disclosures.
• Corporate governance consists of the board of directors now needing to be independent.
• Information technology has raised the concern of online privacy.

Social Responsibility and Organizations

• Social responsibility includes the set of obligations an organization has to protect and enhance the societal context in which it functions.
• Organizations exercise social responsibility toward their stakeholders, the natural environment, and the general social welfare.
• Organizational stakeholders refers to a person or organization who is directly affected by the practices of an organization and has a stake in its performance.
• Most companies focus on three main groups: customers, employees, and investors
• Laws now regulate how business treats the natural environment, but much remains to be done.
• Organizations also contribute significantly to charities, philanthropic organizations, and not-for-profit foundations.

Arguments For/Against Social Responsibility

• Arguments for include the idea that business creates problems and should solve them; corporations are citizens; businesses have relevant resources; and that business can profit from such ventures.
• Arguments against include the idea that businesses should simply focus on profit; that involvement gives business too much power; and that there is a potential for conflict of interest along with a lack of expertise.
• Managers should assess their own values, beliefs, and priorities when deciding which stance and approach to take on social responsibility.

Organizational Approaches to Social Responsibility

• Obstructionist Stance means a firm does as little as possible.
• Defensive Stance occurs when a firm does only what is legally required.
• Accommodative Stance means a firm meets legal requirements and goes beyond sometimes.
• Proactive Stance occurs when a firm views itself as a citizen and seeks opportunities to contribute.

How Government Influences Organizations

• Government influences organizations through regulation in the form of laws and rules that dictate what organizations can and cannot do.
• Through indirect regulation, for example, providing tax incentives for companies who opened new training centers.

How Organizations Influence Government

• This may be done through personal contacts, lobbying which employs persons or groups representing an organization before political bodies, and through political action committees (PACs), which solicit and distribute money to political candidates.

Managing Social Responsibility

• Legal compliance involves the extent to which the organization complies with local, state, federal, and International laws.
• Ethical compliance refers to the extent to which the firm and its members follow basic ethical standards of behavior.
• Philanthropic giving involves awarding funds or other gifts to charities.
• Organizational leadership and culture can define the social stand an organization adopts.
• Whistle blowing occurs when an employee discloses illegal or unethical conduct by others within an organization.
• Corporate social audit is a formal and thorough analysis of the effectiveness of a firm's social performance.