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Chapter 8
Personal and Organizational Ethics
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1.
2.
3.
4.
5.
Understand the different levels at which business ethics may be addressed.
Differentiate between consequence-based and duty-based principles of ethics.
Enumerate and discuss principles of personal ethical decision making and ethical tests for
screening ethical decisions.
Identify the factors affecting an organization’s moral climate and provide examples of
these factors at work.
Describe and explain actions, strategies, or “best practices” that management may take to
improve an organization’s ethical climate.
TEACHING SUGGESTIONS
INTRODUCTION – Chapter 8 has two primary purposes, the first of which is to explore some
of the various ways to make judgments about ethical dilemmas. The authors present two
approaches to making moral judgments, the principles approach and the ethical tests approach.
The second purpose is to discuss ways in which managers can improve the moral culture and
behavior of their organizations.
KEY TALKING POINTS – This chapter gets into what many philosophers consider the heart of
ethics—how to make judgments about ethical dilemmas and come to justifiable decisions about
them. As students will quickly note, there is a bewildering collection of ways to make moral
judgments. The authors introduce and discuss nine different principles and seven different
ethical tests that a manager might use to think about moral dilemmas in the business context. In
addition to these sixteen concepts, the authors also provide a table with fourteen additional
principles (although to be fair, there is some overlap between the table and text) and methods to
reconcile conflicts among the various approaches.
Most people rely on their instincts to make moral judgments, as pointed out in the text. The
students in your class will be no different, and so they will likely become somewhat frustrated
trying to learn all of these different approaches. One way to help overcome this frustration and
simultaneously help cement the concepts in their minds is to provide a number of ethical
dilemmas for them to debate in class discussions (moral philosophy textbooks typically have a
plethora of such cases and a hypothetical ethical dilemma is available in the group project for
this chapter). The students will be tempted to come to an immediate decision about the “right
thing to do” (relying on their instincts), but the instructor will need to hold them back and guide
the discussion toward the different principles and ethical tests that can be used to deliberate
about the cases. It often helps for students to analyze the dilemmas using an ethical principles
and/or ethical principles matrix as this device enables students to visualize the differences in the
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Chapter Notes
various principles and tests. A sample matrix is included at the end of this chapter. Instructors
also may want to assign students to read “Sorrow and Guilt: An Ethical Analysis of Layoffs”
from SAM Advanced Management Journal, Spring 2000, pp. 4-13. This article reviews the
different ethical principles utilized by managers when making decisions regarding job layoffs
and shows students that the ethical principles and tests are relevant. The article also illustrates
that the principles actually serve as the basis for many decisions made by management.
A particular strength of this chapter is the authors’ emphasis on the ethical climates within
organizations, and the profound influence they have on individuals’ moral judgments. Although
the textbook cannot do full justice to this idea (due to space limitations), there is strong evidence
of the overwhelming power of organizational climates on individual ways of thinking, feeling,
and acting. As the chapter indicates, a survey of over 1,500 Harvard Business Review readers
found that the behavior of superiors is the number one factor that influences unethical decisions
and behaviors.
Even Lawrence Kohlberg, the pioneer of the cognitive moral development field, recognized the
influence of group forces over the individual’s ethical decision making, stating, “Individual
moral action usually takes place in a social or group context and that . . . context usually has a
profound influence on the moral decision making of individuals.” If we recognize the strong
influence of organizational climate in conjunction with Kohlberg’s observation that most adults
make moral judgments at his level 2, we can see why organizational members are so compliant
with their bosses’ demands or even mere suggestions. Instructors will do well to emphasize the
influence of organizational climate, because the prevailing assumption among Americans is that
individuals make individual choices, largely unaffected by “outside” influences.
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
HP: The Pretexting Predicament
The Waiter Rule: What Makes for a Good CEO?
Do as I Say, Not as I Did
Say-on-Pay
Martha Stewart: Free Trading or Insider Trading?
The Case of the Killer Phrases (A)
To Hire or Not to Hire
Does Cheating in Golf Predict Cheating in Business?
The Travel Billing Expense Controversy
Phantom Expenses
Family Business
Should Business Hire Illegal Aliens?
This Little Piggy: Should the Xeno-Pig Make it to Market?
Toxic Tacos: The Case of Genetically Modified Foods
The Betaseron Decision (A)
A Moral Dilemma: Head Versus Heart
Dead Peasant Life Insurance: Smart Business or Poor Ethical Practice?
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Chapter Notes
Ethics in Practice Cases:
Promise Versus Lie
Higher Goals, More Pressure, Lower Ethics
The Anonymous CEO – Strong or Weak Ethical Leader?
Search the Web:
Business Ethics and Texas Instruments –
http://www.ti.com/corp/docs/company/citizen/ethics/index.shtml
The Ethics & Compliance Officer Association - http://www.theecoa.org
Society of Corporate Compliance and Ethics (SCCE) –
http://www.corporatecompliance.org/
Aflac’s Code of Conduct - http://www.aflac.com
Video clips:
Spying at Work
Executive Pay Days
CEO Compensation
Halliburton CEO Shipping Out
Protesting Nike Sweatshops
Anita Roddick and The Body Shop
Sarbanes-Oxley Act
Whistleblowers Honored
You Tube and Whistleblowing
Bristol-Myers Squibb: Questionable Ethics
Gender Bias Suit Against Wal-Mart
Boeing Going Green
Boeing 787 Dreamliner
Power Point slides:
Visit http://academic.cengage.com/management/carroll for slides related to this and other
chapters.
LECTURE OUTLINE
I.
LEVELS AT WHICH ETHICS MAY BE ADDRESSED
A. Personal Level
B. Organizational Level
C. Industry Level
D. Societal and Global Levels
II.
PERSONAL AND MANAGERIAL ETHICS
A. Principles Approach to Ethics
1. What is an Ethics Principle?
2. Types of Ethical Principles or Theories
3. Principle of Utilitarianism
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B.
4. Kant’s Categorical Imperative
5. Principle of Rights
6. Principle of Justice
7. Ethic of Care
8. Virtue Ethics
9. Servant Leadership
10. The Golden Rule
11. Reconciling Ethical Conflicts
Ethical Tests Approach
1. Test of Common Sense
2. Test of One’s Best Self
3. Test of Making Something Public
4. Test of Ventilation
5. Test of the Purified Idea
6. Watch Out for the Big Four
7. Gag Test
III.
MANAGING ORGANIZATIONAL ETHICS
A. Factors Affecting the Organization’s Moral Climate
1. Pressures Exerted on Employees by Superiors
B. Improving the Organization’s Ethical Culture
1. Compliance vs. Ethics Orientation
2. Top Management Leadership (Moral Management)
a. Weak Ethical Leadership
b. Strong Ethical Leadership
c. Ethical Leadership Characteristics
3. Effective Communication
4. Ethics Programs and Ethics Officers
a. Ethics Officers
b. Raising the Status of Ethics Officers
5. Setting Realistic Objectives
6. Ethical Decision-Making Processes
a. Ethics Check
b. Ethics Quick Test
c. Sears’ Guidelines
7. Codes of Conduct
8. Disciplining Violators of Ethics Standards
9. Ethics “Hotlines” and Whistle-Blowing Mechanisms
10. Business Ethics Training
a. Business Roundtable Institute for Corporate Ethics
11. Ethics Audits and Self-Assessments
12. Corporate Transparency
13. Board of Director Leadership and Oversight
IV.
FROM MORAL DECISIONS TO MORAL ORGANIZATIONS
V.
SUMMARY
Chapter Notes
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Chapter Notes
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.
1.
Students will have many different answers to this question. They may range from
decisions whether or not to cheat on a test, to situations in their love lives, to shoplifting.
Answers to the second part of the question, ethical dilemmas they have faced as part of an
organization, are likely to be similarly diverse. One that I faced in an organization was
whether to tell the managing partner at a law firm where I did not work that associates
were padding their hours on their time sheets. The law firm made more money from the
additional hours, and I was friends with some of the attorneys who were padding their
time. However, the clients were paying for the additional time. Further, since I wasn’t
employed with the firm where the practice was occurring, I wasn’t certain how
management would respond to the news. Finally, reporting the incident could have had a
negative impact on my reputation in the legal community. Another example would be
whether to tell a customer that senior managers at a bank were repeating false rumors
about the customer’s business practices. Assume that these rumors could potentially do
great harm to the customer’s business, but the managers have the ability to fire the
informant if they desire to do so. Further, assume that this dilemma occurred during a
recession, making the likelihood of finding another job comparable to the one at the bank
slim.
2.
In the first example I could have used any one of the guides presented in this chapter to
help me with my decision. I could have weighed the consequences of my decision, both
on the client’s business and on my family; I could have thought about how I would feel if
my decision was on the front page of the local newspaper; I could have used the principle
of caring—some of the clients were friends of mine. One of the most popular ethical tests
in business is the test of making something public. In fact, it is the test that Warren Buffet
employs at Berkshire Hathaway. If I had asked myself how I would feel if others knew
that I didn’t report the padding of the time sheets, I would have come forward to the
management of the law firm were the practice was taking place.
3.
Obviously, students will have different answers to this question. After all, philosophers
have been debating this very question for hundreds of years with no resolution! On the
consequential side, our society believes that results matter. What happens to people as a
result of my actions is very important. Students like teleological theories, especially
utilitarianism, because they often apply a cost-benefit approach to decision-making in their
other business coursework. However, teleological theories have trouble with questions of
rights and justice. We also think that there are some things that just should not be done,
regardless of the outcome (e.g., killing an innocent person or denying someone the right to
pursue his or her happiness). Many students will agree that there are certain moral and
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Chapter Notes
legal rights that cannot be overridden by utility. I personally tend to favor the
deontological perspective—I believe there are things that should be done regardless of the
consequences. I also think that the consequences of doing my duty, or “the right thing”
will almost always provide positive outcomes.
4.
Because ethical leadership is built upon management that embodies the characteristics of a
moral manager and a moral person, I would focus on these aspects of ethical leadership. A
moral person exhibits (1) ethical traits (such as honesty, trustworthiness, etc. – the
foundation of virtue ethics), (2) ethical behaviors and (3) ethical decision-making. A
moral manager (1) serves as an ethical role model, (2) effectively communicates ethical
choices, and (3) uses effective rewards and discipline. Since research has shown that
behavior of superiors is the factor most likely to impact an organization’s ethical climate, I
believe that it would be paramount for me to serve as an ethical role model by
demonstrating ethical behavior, specifically exhibiting the traits of a virtue ethicist and
exercising ethical decision-making. I would strive to effectively communicate ethical
choices, through my own actions and through the implementation of the company’s code
of conduct and training courses. Finally, I would emphasize that there are rewards for
ethical behavior and punishments for unethical behavior and implement those measures
when appropriate.
5.
Codes of conduct, if embedded in the culture of a company, can provide effective guidance
to employees. Collins and Porras, in Built to Last, talk about the effects of “cult-like
cultures.” These cultures provide ideological control (assuring that employees look at the
world in similar ways) and simultaneous operational autonomy. An effective code of
conduct can provide a like result. Furthermore, the Sarbanes-Oxley Act of 2002 requires
public companies to have a code of conduct for senior financial officers or to publicly
disclose why they do not have this code. Unfortunately, in reality, most codes of conduct
are written to protect the company from its employees’ behaviors, and many are little more
than window dressing. On balance, like most things, codes of conduct can be helpful if
they are carefully written, properly implemented, uniformly enforced, and embedded in the
culture. And like most things, they can be harmful if employees see them as hypocritical,
window dressing, or applied capriciously.
6.
In my opinion, this question does not address the critical issue. Business ethics can be
taught. The subject matter is no more difficult to grasp than any other academic subject.
People have been making judgments about right and wrong all of their lives, using some
type of criteria (or maybe just instinct, as the authors point out). People can learn how to
use different ethical criteria. The more important, and much more relevant question is one
of motivation—Rest’s third component. Because of this, effective ethics training must
focus on the organization’s ethical climate, providing an atmosphere that is conducive to,
and supportive of ethical decisions. As discussed in this chapter, employees of firms feel
pressured to compromise their ethics in pursuit of other (usually financial) goals. The
problem is not that people don’t know how to make ethical decisions—the problem is that
they are worried that doing the right thing will result in punishment rather than reward. So
the real question is whether senior managers (those who establish the ethical climate in
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Chapter Notes
their organizations) can learn or be persuaded to establish climates that encourage and
reward ethical behavior first and foremost, not exclusive pursuit of profit.
7.
The single most important factor in establishing a strong ethical climate is the commitment
and behavior of senior managers. These are the people in the organization who set the
standards of behavior for everyone else. If the senior managers authentically believe in
ethical behavior, and act that way themselves, there will be little difficulty in establishing
an ethical work climate. All of the other practices discussed in the textbook—
communicating effectively, establishing ethics programs, setting realistic performance
objectives, including ethics in the decision-making process, establishing codes of conduct,
disciplining violators, setting up hotlines, providing ethics training, performing ethics
audits, being transparent, and providing effective board oversight will be helpful, but these
measures will only be successful if senior management sets a moral tone at the top.
GROUP PROJECT
Divide students into groups of four to five students. Instruct them to read the following scenario:
“Alex Smith is preparing a sales presentation for his company, Phones4Kids, which
manufactures and sells cell phones that are specifically designed for children. Phones4Kids
employs several hundred workers in Mooray, Missouri, a small town with only two other large
employers in addition to Phones4Kids. Alex hopes to sell specialty phones for boys and girls
aged 6-10 to a retailer in Hooptown, Missouri. This sale would represent approximately 25% of
the projected revenue for the current year for Phones4Kids. The phones are not specifically
designed for internet access; however, about eight percent of the time the phones can pick up a
wireless internet connection and the user can access the internet. There is a 48% chance that once
a child connects to the internet using one of these specialty phones, he or she could access a
pornographic site. Derrick Vance, Alex’s boss, has promised Alex a commission in addition to
his regular salary if he makes the sale to the retailer. However, if he tells the retailer about the
potential to access pornography via the cell phone, the retailer may buy the phones from a
competitor that sells phones without internet access. Alex has reviewed the corporate policy for
Phones4Kids and can find no specific guidance on how to handle this situation. However, the
policy does indicate that sales representatives are to be honest and fair in their dealings with
customers.”
Each group should determine how Alex should handle this situation in a written memo.
Specifically, the group should use the ethical decision-making process to reach a resolution to
the hypothetical. The group’s ethics screen should include an analysis of several ethical
principles and tests.
Principles Approach to Ethics
Teleological Theories
Egoism
Utilitarianism
Deontological Theories
Kant
Rights
Justice
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Chapter Notes
Ethical Tests Approach
Test of Common Sense
Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of the Purified Idea
Watch Out for the Big Four
Gag Test