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Chapter 9. Creating an Ethical Organizational Climate The Leader as Ethics Officer Leaders are largely responsible for creating the organizations we admire for their ethical behavior. Leaders are the ethics officers of their organizations, casting light or shadow in large part through the example they set. Leaders are generally seen as legitimate, credible, and attractive because they occupy positions of authority with power and status. Ethical leaders build on this foundation. © 2015 SAGE Publications, Inc. The Leader as Ethics Officer The unethical leader falls short as both a moral person and a moral influence agent. The hypocritical leader talks a lot about ethical values but doesn’t live up to the rhetoric. The ethically neutral leader is not clearly seen as either ethical or unethical. This person doesn’t send out strong messages about ethics and leaves followers unsure about where he or she stands on moral issues. © 2015 SAGE Publications, Inc. Ethical Climates Management professors Bart Victor and John Cullen argue that ethical climates can be classified according to the criteria members use to make moral choices and the groups that members refer to when making ethical determinations. 5 primary climates, according to Victor and Cullen: 1. Instrumental 2. Caring 3. Law and order 4. Rules 5. Independence © 2015 SAGE Publications, Inc. Signs of Healthy Ethical Climates There is no one-size-fits-all approach to creating an ethical climate. Key markers of highly ethical organizations include humility, zero tolerance for destructive behaviors, integrity, justice, trust, a focus on process, and structural reinforcement. © 2015 SAGE Publications, Inc. Humility The Icarus Syndrome: First, a culture of competition encourages members to break the rules to get a competitive advantage and to excuse their moral failings. Second, high performance organizations are so focused on results (generally financial) that they tolerate wrongdoing if it achieves their objectives. Third, an exaggerated focus on mission encourages members to ignore the rules. Fourth, members tell stories that justify their poor behavior by, for example, demonizing their opponents. Fifth, the culture becomes isolated. As a consequence, group members accept behaviors like bribery, cheating and deception that would be seen as unethical by society © 2015 SAGE Publications, Inc. Humility Ethical leaders play a critical role in alerting followers and other leaders to the dangers of success and self-centeredness. They promote humility as a collective virtue as they nurture this character trait in themselves Humble organizations are also sensitive to the signs of ethical trouble © 2015 SAGE Publications, Inc. Box 9.1: Signs of Ethical Collapse Arizona State University professor Marianne Jennings identifies seven signs that a company may be at risk for moral failure: Sign 1: Pressure to Maintain Numbers Sign 2: Fear and Silence Sign 3: Young ‘Uns and a Bigger-Than-Life CEO © 2015 SAGE Publications, Inc. Sign 4: Weak Board Sign 5: Conflicts of Interest Sign 6: Innovation Like No Other Sign 7: Goodness in Some Areas Atones for Evil in Others Zero Tolerance for Destructive Behaviors Most of us will experience the shadows cast by dark- side behaviors. These are destructive or antisocial actions that deliberately attempt to harm others or the organization. Those who engage in such unethical behaviors are driven to meet their own needs at the expense of coworkers and the group as a whole. © 2015 SAGE Publications, Inc. Zero Tolerance for Destructive Behaviors Common categories of misbehaviors in an organization: Incivility consists of rude or discourteous actions that disregard others and violate norms for respect. Aggression refers to consciously trying to hurt others or the organization itself. Sexual harassment is a form of aggression directed largely at women. Components of hostile working conditions include demeaning comments, suggestive gestures, threats, propositions, bribes, and sexual assault. The work performance of victims drops, and they may quit their jobs. Discrimination is putting members of selected groups, such as women, minorities, disabled employees, older workers, and homeless people, at a disadvantage. © 2015 SAGE Publications, Inc. Zero Tolerance for Destructive Behaviors Fortunately, leaders can significantly reduce the rate of destructive behaviors by actively seeking to prevent and control them. Moral leaders: Create zero-tolerance policies that prohibit antisocial actions. Obey guidelines. Constantly monitor for possible violations. Move quickly when standards are violated. Address the underlying factors that trigger destructive actions. © 2015 SAGE Publications, Inc. Leadership at the Movie: Inside Job Discussion Questions: How was the financial crisis an “inside job?” What signs of moral collapse were present in the financial services industry before the crash? After the crash? What steps, if any, should be taken to reform Wall Street? © 2015 SAGE Publications, Inc. Moral Leaders Moral leaders: Create zero-tolerance policies that prohibit antisocial actions. Obey guidelines. Constantly monitor for possible violations. Move quickly when standards are violated Address the underlying factors that trigger destructive actions. In collective corruption two or more individuals cooperate in unethical behavior.18 They abuse their organizational positions and authority to benefit themselves, their work units or their organizations. © 2015 SAGE Publications, Inc. Justice Justice in the workplace takes three forms: distributive, procedural, and interactional. Moral leaders treat people with dignity and respect and share information about how decisions are made. Perceptions of justice or injustice have been found to have powerful effects on the attitudes and behaviors of organizational members. In contrast, perceptions of unfair treatment increase such withdrawal behaviors as neglecting job responsibilities, absenteeism, and quitting. © 2015 SAGE Publications, Inc. Focus on Follower Ethics: Journey into Corruption Ethical theorists Blake Ashforth and Vikas Anand argue that organizational newcomers are socialized into corrupt activities. They can be corrupted through three different avenues: cooperation, incrementalism, and compromise. In cooperation, leaders offer rewards that reduce newcomers’ discomfort with unethical behavior. Incrementalism gradually introduces newcomers to unethical practices, leading them up the “ladder of corruption.” Compromise ”backs” individuals into corruption as they try to solve difficult problems and resolve conflicts. © 2015 SAGE Publications, Inc. Integrity Integrity is ethical soundness, wholeness, and consistency. All units and organizational levels share a commitment to high moral standards, backing up their ethical talk with their ethical walk. Consistency increases the level of trust, encouraging members and units to be vulnerable to one another. © 2015 SAGE Publications, Inc. Integrity According to business ethicist Lynn Paine, managers who act with integrity see ethics as a driving force of an enterprise. Paine believes that any effort to improve organizational integrity must include the following elements: There are sensible, clearly communicated values and commitments. Company leaders are committed to and act on the values. The values are part of the routine decision-making process and are factored into every important organizational activity. Systems and structures support and reinforce organizational commitments. Leaders throughout the organization have the knowledge and skills they need to make ethical decisions. © 2015 SAGE Publications, Inc. Trust Ethical organizations are marked by a high degree of trust. Organizational trust describes the collective set of positive expectations members hold about the intentions and behaviors of other stakeholders (co-workers, superiors, followers, other departments), which are based on their experiences and interactions as organizational members. Over the past 30 years trust has moved from the periphery to the center of organizational studies, primarily because it has been linked to so many positive outcomes. © 2015 SAGE Publications, Inc. Process Focus (Concern for Means and Ends) Concern for how an organization achieves its goals is another important indicator of a healthy ethical climate. When leaders pressure employees to produce sales and profits by whatever means possible, followers can feel alienated and powerless. Sociologists use the term anomie to refer to this sense of normlessness and unease that results when rules lose their force. Leaders can address the problem of anomie by making sure that goals are achieved through ethical means. © 2015 SAGE Publications, Inc. Structural Reinforcement 3 elements of an organization’s structure have a particularly strong impact on moral behavior: 1. Monetary and nonmonetary reward systems 2. Performance and evaluation processes 3. Decision-making rights and responsibilities © 2015 SAGE Publications, Inc. Social Responsibility Concern for those outside the organization is another sign of a healthy ethical climate. Recognizing the legitimate claims of stakeholders is key to social responsibility. Socially responsible organizations try to identify all stakeholders and their interests. They seek to be accountable to these groups, cooperating with them whenever possible and minimizing the negative impact of organizational activities. © 2015 SAGE Publications, Inc. Climate-Building Tools To build or create ethical organizational climates, leaders rely heavily on three tools: Core values Codes of ethics Ethical learning © 2015 SAGE Publications, Inc. Discovering Core Values Core Ideology Management experts James Collins and Jerry Porras use the term core ideology to refer to the central identity or character of an organization. Core values are the first component of core ideology. Core purpose is the second part of an organization’s ideology. Your organization’s purpose statement should inspire members. © 2015 SAGE Publications, Inc. Discovering Core Values Appreciative Inquiry Participants in the AI process set out to discover the organization’s “positive core” and use the group’s strengths to guide individual and collective action. AI begins by choosing an affirmative topic, based on the assumption that what organizational members study will determine the kind of organizations they create. The discovery phase identifies “the best of what has been and what is.” In the dream phase participants look to the future to ask, “What might be?” © 2015 SAGE Publications, Inc. Codes of Ethics Codes of ethics are among the most common ethics tools. Skeptics offer criticism of ethics statements. Defenders of ethical codes point to their potential benefits. These benefits include: A code describes an organization’s ethical stance both to members and to the outside world. A formal ethics statement can improve the group’s image while protecting it from lawsuits and further regulation. Referring to a code can encourage followers and leaders to resist unethical group and organizational pressures. A written document can have a direct, positive influence on ethical behavior. © 2015 SAGE Publications, Inc. Codes of Ethics Most codes of ethics address the following: Conflicts of interest Records, funds, and assets Information Outside relationships Employment practices Other practices © 2015 SAGE Publications, Inc. Ethics Training Effective ethics training can make positive difference. Effective training does the following: Focuses on the organization’s unique ethical problems. Taps into the experiences of participants. Actively engages participants. Reinforces the organization’s ideology and standards. Is integrated into the entire curriculum. © 2015 SAGE Publications, Inc. Case Study: Siemens Global Discussion Questions: Given the company’s massive size and the scale of its corrupt activities, did Siemens get off too easy? Should it have faced additional financial penalties? What should be the elements of a zero-tolerance ethics policy? Are any of these elements missing at Siemens Global? What lessons do you take away from Siemens’s efforts to eliminate corruption? Should the United States prosecute companies headquartered in other countries for violating its Foreign Corrupt Practices Act? What steps can multinational firms take to prevent their employees from offering bribes, particularly to government officials in poor nations? © 2015 SAGE Publications, Inc.