Ethics - The Practice PDF

1 Based on Ch 6  Learning Outcomes 6-2 1. Recognize appropriate ethical leadership. 2. Define and describe the pros and cons of a statement of values. 3. Make the distinction between codes of conduct and codes of ethics. 4. Appreciate the purpose of ethic...

1 Based on Ch 6  Learning Outcomes 6-2 1. Recognize appropriate ethical leadership. 2. Define and describe the pros and cons of a statement of values. 3. Make the distinction between codes of conduct and codes of ethics. 4. Appreciate the purpose of ethics training in an organization. 5. Define an ethics audit and explain the role of ethics officers and ethics committees. 6. Understand how ethics reporting systems work and define whistleblowing. 7. Know who is responsible for managing the ethics of business. 8. Identify the approaches to ethics programs. 9. Evaluate ethics programs and list their benefits. 10. Recognize that ethical misbehaviour may occur despite management efforts and the implementation of ethics programs.  Note: 3 Being “ethical” is one of the cornerstones of Corporate Social Responsibility  Ethical Leadership Forms 6-4  Research on leadership identifies three possible forms applicable to the ethics of business and corporate social responsibility:  Ethical → communicate ethical standards and encourage ethical conduct  Responsible → narrow orientation focused on financial performance and extended orientation with stakeholder view  Servant leadership → emphasizes concern for others, and combines motivation to lead with the need to serve others ◼ Includes the design and implementation of corporate ethics programs  Statement of Values 6-5  A description of the beliefs, principles, and basic assumptions about what is desirable or worth striving for in an organization.  Key components to value statements:  Key stakeholder interests to be satisfied and balanced  Emphasis on quality  Efficiency  Work climate  Observance of codes of conduct  Codes of Conduct and Ethics 6-6  Code of conduct → explicitly states what appropriate behaviour is by identifying what is acceptable and unacceptable  Code of ethics → a statement of principles or values that guide behaviour by describing the general value system within which a corporation attempts to operate in a given environment  Distinction between Codes of 6-7 Conduct and Codes of Ethics Codes of Conduct Codes of Ethics Codes of ethics suggest guidelines to Enforced by an external power and follow and empower individuals to act authority; convey rules that tell people according to their consciences. Penalties what they must or must not do. are not imposed and writers emphasize Members of organizations must obey the qualities they think members should or face penalties for failing to do so. have. Key characteristics: Key characteristics: Imposed by others Self-imposed What must be done or what must not Who we are be done What we stand for Rules Guidelines or guiding principles TABLE 6.1 © 2020 McGraw-Hill Education Ltd.  Codes of Conduct and 6-8 Codes of Ethics Cont’d…  Types of codes:  Corporate or business enterprise  Professional organizations  Industry and sector  Single issue  Codes from national and international bodies  Codes institutionalize ethical behaviour by:  Increasing awareness  Discouraging ethical apathy  Facilitating ethical decision making  Making it easier to refuse an unethical request  Content of Codes of Conduct and Codes of Ethics 6-9 TABLE 6.2 © 2020 McGraw-Hill Education Ltd.  Codes of Conduct and Codes of Ethics Cont’d… 6 - 10  Content of codes has evolved over time and through five generations:  Firstgeneration → conflict of interest  Second generation → commercial conduct  Third generation → employee rights and motivation of the workforce  Fourth generation → wider responsibility, with attention on environment and respect for communities  Fifth generation → international concerns, including human rights, the rule of law and labour conditions  Criticisms 6 - 11  Unenforceable standard  Unnecessary, as most corporations operate at ethical level above code  Only necessary for the less scrupulous  Penalties may be insignificant  Convincing everyone to comply is not easy  Often idealistic and written in meaningless generalities  Merely to control competitive conduct among corporations, designed to prevent government legislation  Serve as a response to public criticism  Ethics Training 6 - 12  Involves teaching employees about the values and policies on ethics they should follow in their decision making  Teaching sessions can involve: Managers or outside consultants Addressed to all levels of employees, with emphasis on management Online exercises Practical checklists and tests to evaluate actions  Checklists and Tests 6 - 13  Otto Bremer → 4 ethical questions  Josephson → the “bell, book, candle” model  Nash → plainly worded questions should be used by managers when examining ethics of a business decision  Pagano model (1987) → identifies six tests that provide insights into the ethics of a business’ actions  Nash: Some Plainly Worded Questions 14 1. Have you defined the problem accurately? 2. How would you define the problem if you stood on the other side of the fence? 3. How did this situation occur in the first place? 4. To whom and to what do you give your loyalty as a person and as a member of the corporation? 5. What is your intention in making this decision? 6. How does this intention compare with the probable results?  Nash: Some Plainly Worded Questions 15 7. Whom could your decision or action injure? 8. Can you discuss the problem with the affected parties before you make your decision? 9. Are you confident that your position will be as valid over a long period of time as it seems now? 10. Could you disclose without qualm your decision or action to your boss, your CEO, the Board of Directors, your family, society as a whole? 11. What is the symbolic potential of your action if understood? If misunderstood? 12. Under what conditions would you allow exceptions to your stand?  The Pagano Model 16 1. Is it legal? 2. The benefit cost test (the greatest good for the greatest number?) 3. The categorical imperative (Do you want this action to be a universal standard?) 4. The light of day test (What if your actions appeared on TV?) 5. Do unto others (Do you want the same to happen to you?) 6. The ventilation test (Get a second opinion from someone with no investment in the outcome)  Understanding Conflicts of Interest 6 - 17  Conflict of interest → situation in which an individual has a private or personal interest that is sufficient to appear to influence the objective exercise of that individual’s duties  Three types of conflict: 1. Real 2. Apparent 3. Potential  Common Conflicts of Interest 6 - 18 Self-dealing—Exists where a manager or employee takes an action in an official capacity that involves dealing with oneself in a private capacity and that confers a benefit to oneself. Today this extends to one’s spouse, family members, and business partners. Accepting gifts or benefits—Involves the acceptance of some benefit. Influence peddling—The practice of soliciting some form of benefit; for example, asking for a kickback or gift from a supplier if a purchase is made. Using employer’s property—The inappropriate use of an employer’s property; for example, taking office supplies for home use. Using confidential information—The use for personal or private purposes of confidential information obtained from some other source, for example customers or suppliers, to gain some benefit. Outside employment or moonlighting—The work or activity in which an employee engages outside normal working hours for additional remuneration. Post-employment—Subsequent or future employment where information or contacts obtained during employment results in some benefit. Personal conduct—The situation where an employee’s behaviour in private life may reflect adversely on the employer. © 2020 McGraw-Hill Education Ltd. TABLE 6.3  Ethics Audits, 6 - 19 Managers, and Committees  Systematic effort to discover actual or potential unethical behaviour in an organization  Designed to uncover unethical behaviour and identify existing opportunities for unethical behaviour  Useful in conjunction with a code of ethics  Conducted by consultants → advise management on how to put “integrity” into corporate culture  Ethics Audits, Managers, 6 - 20 and Committees Cont’d…  Ethics officer → independent manager who:  Reports to the board of directors or CEO  Reviews complaints or information from anyone in the organization or any stakeholder  Studies situation and recommends action if necessary  Compliance officer → ensures all employees are familiar with corporation’s policies and codes, and with government laws and regulations  Ethics committees → group of directors, managers or staff formed to monitor ethical standards and behaviour  Ethics Reporting Systems 6 - 21 and Whistleblowing  Corporations have established reporting systems so that they can become aware of issues and concerns relating to corporate ethical conduct  Most common = hotlines  Whistleblowing → act of voluntary disclosure of inappropriate behaviour or decisions to persons in positions of authority in an organization  Many ethical issues related to whistleblowing have ethical implications for whistleblowers and managers  Whistleblowing: Ethical Implications 6 - 22  Issues:  Remain silent, quit, or disclose wrongdoing?  Range of concerns from clearly illegal to maybe illegal to issue of morality  Does obligation to employer supersede obligation to self, profession, or industry?  Will the whistleblower be believed?  Is the whistleblower a hero or a snitch?  When and who to tell?  What will the consequences be?  Ethics: Who is Responsible? 6 - 23  Boards of directors have two tasks in relation to ethics:  To collectively identify values that determine acceptable behaviour in the firm  Put in place a process that ensures values are reflected in action  Success of any ethics programs depends on commitment of top management:  Announce the program  Champion its development and implementation  Aspire to lead in an ethical manner  Management and Leadership Models 6 - 24 Immoral Amoral Moral A posture or approach that is devoid A posture or approach that is without Conform to high standards of ethical principles and actively ethics, but not actively immoral of ethical behaviour or opposed to what is moral Two types: intentionally or professional standards Management’s motives are selfish unintentionally amoral Aspire to succeed only and it cares only about the Intentionally amoral leaders do not within confines of ethical individual’s or the organization’s consider ethics, as they believe principles; for example gains business activity lies outside of moral fairness, justice, and due Management to some degree knows judgments; neither moral nor immoral, process right from wrong and chooses to do as different rules apply to business Concerned with letter and wrong Unintentionally amoral leaders are spirit of the law May be motivated by greed and morally careless, unaware of or Prefer standards that are profitability, and organizational (or inattentive to impact of their decisions higher than the minimum personal) success is the goal to be on others set by the law achieved at any price They lack ethical perception, sensitivity, Assume leadership when Do not care about claims or or awareness ethical dilemmas arise expectations of others May be well-intentioned but unaware Make ethics a driving The law is regarded as a barrier to of harms from their actions force of the organization be overcome and will circumvent if it “Ethical gears in neutral” will achieve their ends Use letter of the law instead of spirit Do not make good corporate citizens Cannot make good corporate citizens TABLE 6.4 © 2020 McGraw-Hill Education Ltd.  Ethics Programs: Approaches 6 - 25  Classification of programs:  Formal approach → based on organizational norms that are written as a code of conduct  Monological approach → allows organizational managers and employees to determine for themselves what is right or wrong  Dialogical approach → emphasizes communication before decisions are made and implemented  Compliance versus Values-based Programs 6 - 26 Compliance-based Values-based Rules, laws, policies Values, ethics, guiding principles Conformity with externally imposed standards Self-governance to chosen standards; self-imposed Prevent criminal misconduct Enable responsible conduct Lawyer-driven Management-driven Educational approach: policies and rules, Educational approach: policies and rules, but also legalistic guidelines/awareness through leadership Employee discretion: limited Employee discretion: increased Control: auditing, penalties Control: accountability, systems, decision processes Code of Conduct: Code of Ethics: Specific General Prescriptions/directives Values/principles Uniformity Judgment Enforceable statements of specific behaviour “Empowering” and “aspirational” © 2020 McGraw-Hill Education Ltd. TABLE 6.5  Ethics Programs: Evaluation 6 - 27  Implicit ethics programs are implemented through:  Organization’s culture, reward systems, valued behaviour, promotion policies, management example, general practice and performance measures  Criteria for an effective ethics program:  Visibility  Ownership  Fit  Balance  Ethics Programs: Evaluation 6 - 28 and Benefits Cont’d…  Benefits of programs to manage ethics:  Business practices more beneficial to society  Increased awareness of ethics  Alignment of corporate behaviour with values  Heightened ethical sensitivity of employees and managers  Sensitizes managers and employees to legal requirements  Avoidance of criminal acts  Integration of values with quality and strategic management  Implications of management decisions on stakeholders  More favourable public image  Ethics Programs: Evaluation 6 - 29 and Benefits Cont’d…  Four types of executive ethical leadership:  Hypocritical leader = strong moral manager and weak moral person  Unethical leader = weak moral manager and weak moral person  Ethical leader = strong moral manager and strong moral person  Ethically silent leader = weak moral manager and either a weak or strong moral person  Ethics Programs: Evaluation 6 - 30 and Benefits Cont’d…  Guidelines for effective ethics management: FIRST: Understand the Existing Ethical Culture SECOND: Communicate the Importance of Ethical Standards THIRD: Focus on the Reward System FOURTH: Promote Ethical Leadership Throughout the Firm  Corporate culture → complex set of values, beliefs, assumptions and symbols that define the way in which an organization conducs its business  Ethicalcorporate culture → “subset” of the organizations broader culture  Why Ethical Leadership and Programs Fail 6 - 31  Managers are morally imperfect  Self-interest  Rationalization and self-delusion  Threat of formal sanctions  Threat of informal sanctions  Tolerance to risk-taking behaviour  Pressure in particular situations  Summary 6 - 32  Corporations must take deliberate actions to reinforce the importance by considering ethical implications in decision making. Key to this is the appropriate form of ethical leadership.  The components of a corporation’s ethics program to accomplish are described. The initial stage should be a statement of values or the equivalent that states in general terms the behaviours expected. These values become the foundation for the corporation’s ethics program.  A code of ethics reflects the values of an organization. A distinction should be made from a code of conduct, which focuses on compliance to rules or regulations instead of values.  Today, corporations are not leaving an understanding of morality to chance and are engaged in a variety of training for everyone in the organization.  Ethics audits are becoming more common as an approach to assessing the ethical implications of a corporation’s practices. Usually such audits are conducted by outside consultants, who can also provide a range of advice about ethics programs. In larger corporations, there is a trend toward an ethics officer of some type being responsible for all aspects of compliance and morality in the organization. Ethics committees in many corporations facilitate the implementation of ethics programs.  Ethics reporting systems are being established. Several complicated issues are associated with whistleblowing and whistleblowers. Managers must carefully monitor the practice to make sure its benefits outweigh the drawbacks.  Someone must take responsibility for the development and implementation of ethics programs. The board of directors and top management must signal their commitment to any program if it is to be successful. A “moral” leadership model is necessary to achieve this.  Approaches to ethics programs are described. The formal approach is most common; the dialogical the least. Most corporations have programs that are a combination of these approaches. Also, the components of programs can be identified as being compliance-based versus values-based.  The components of an ethics program are either compliance-based, following rules and requiring conformance, or values-based, emphasizing values as a way to influence behaviour. In most corporations today, a combination of these approaches is used and referred to as integrity management.  There are several explanations for why ethical leadership and programs fail despite the best efforts and intentions of the corporation and its managers. An ethical corporate culture is necessary for ethics programs to be successful.  Questions? 33