Archie B. Carroll Ann K. Buchholtz Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western, a part of Cengage Learning

Chapter 8 Personal and Organizational Ethics © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Learning Outcomes 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 ethical culture and provide examples. Describe and explain actions, strategies, or “best practices” to improve an organization’s ethical climate. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Chapter Outline Ethics Issues Arise at Different Levels Personal and Managerial Ethics Managing Organizational Ethics From Moral Decisions to Moral Organizations Summary © 2012 South-Western, a part of Cengage Learning

Organizational Ethics Ethical decision making occurs daily in organizations. Many managers have no training in ethics or ethical decision making. Ethics is vital to business success. © 2012 South-Western, a part of Cengage Learning

Levels at Which Ethical Issues May be Addressed Personal level Situations faced in our personal lives outside the context of our employment. Organizational level Workplace situations faced by managers and employees. Industry or profession level A manager or organization might experience business ethics issues at the industry or professional level. Societal and global levels Managers acting in concert through their companies and industries can bring about constructive changes. © 2012 South-Western, a part of Cengage Learning

Personal and Managerial Ethics There are three major approaches to ethical decision making Conventional Approach Discussed in chapter 7. Principles Approach Managers desire to make decisions based on more than is provided by the conventional approach to ethics. A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course. Ethical Tests Approach Discussed later in this chapter. © 2012 South-Western, a part of Cengage Learning

Types of Ethical Principles or Theories Teleological theories Focus on consequences or results. Deontological theories Focus on duties. Aretaic theories Focus on virtue. © 2012 South-Western, a part of Cengage Learning

Principles Approach to Ethics Major principles of ethics Utilitarianism Kant’s Categorical Imperative Rights Justice Principles of care Virtue ethics Servant leadership Golden Rule © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Utilitarianism A teleological principle that focuses on acts that produce the greatest good for the greatest number. Strengths Weaknesses Forces thinking about the general welfare of stakeholders Ignores actions that may be inherently wrong Allows personal decisions to fit into situational complexities May conflict with the notion of justice Difficult to formulate satisfactory rules for decision making © 2012 South-Western, a part of Cengage Learning

Kant’s Categorical Imperative A duty-based, deontological, principle. Formulations: Act only on rules that you would be willing to see everyone follow. Act to treat humanity in every case as an end and never as a means. Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Principle of Rights Moral rights Rights that we ought to have based on moral reasoning. Principle of rights Focuses on examining and possibly protecting individual moral or legal rights. A negative right is the right to be left alone. A positive right is the right to something. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Principle of Justice Involves considering what alternative promotes fair treatment of people. Types of justice Distributive Compensatory Procedural Rawlsian © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Ethical Due Process Process Fairness Have employees been given input into the decision process? Do employees believe the decisions were made and implemented in an appropriate manner? Do managers provide explanations when asked? Do they treat others respectfully? Do they listen to comments being made? © 2012 South-Western, a part of Cengage Learning

Rawls’s Principles of Justice Each person has an equal right to the most basic liberties compatible with similar liberties for others. Social and economic inequalities are arranged so that they are both: Reasonably expected to be to everyone’s advantage, and Attached to positions and offices open to all. © 2012 South-Western, a part of Cengage Learning

Ethic of Care and Virtue Ethics Ethic of care/Principle of caring Traditional ethics focus too much on the individual self. Views the individual as relational, not individualistic– similar to stakeholder theory. Virtue ethics Focuses on individuals becoming imbued with virtues. Based on Aristotle and Plato. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Servant Leadership Servant leadership Based on the moral principle of serving others first, such as employees, customers, and community. © 2012 South-Western, a part of Cengage Learning

Characteristics of Servant Leaders Listening Empathy Healing Persuasion Awareness Foresight Conceptualization Commitment to the growth of people Stewardship Building community © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning The Golden Rule Do unto others as you would have them do unto you. The Golden Rule is: Accepted by most people. Easy to understand. A win-win philosophy. A compass when you need direction. © 2012 South-Western, a part of Cengage Learning

A Sketch of Ethical Principles The Categorical Imperative The Means-Ends Ethic The Conventionalist Ethic The Might-Equals-Right Ethic The Disclosure Rule The Organization Ethic The Golden Rule The Hedonistic Ethic The Professional Ethic The Intuition Ethic The Proportionality Principle The Market Ethic The Revelation Ethic The Utilitarian Ethic © 2012 South-Western, a part of Cengage Learning

Ethical Tests Approach Test of One’s Best Self Test of Making Something Public Test of Ventilation Test of Common Sense Test of the Purified Idea Big Four (greed, speed, laziness, or haziness) Gag Test © 2012 South-Western, a part of Cengage Learning

Factors Affecting the Morality of Managers Society’s Moral Climate Business’s Moral Climate Industry’s Moral Climate Individual One’s Personal Situation Superiors Policies Peers Organization’s Moral Climate © 2012 South-Western, a part of Cengage Learning

Factors Affecting the Organization’s Moral Climate Behavior of superiors Ethical practices of one’s industry or profession Behavior of one’s peers in the organization Formal organizational policy (or lack thereof) Personal financial need © 2012 South-Western, a part of Cengage Learning

Improving Organizational Ethical Culture Most organizations are a mix of compliance and emphasizing values like ethics. Concerns about the compliance orientation Could undermine the ways of thinking or habits of mind that are needed in ethics thinking. Can squeeze out ethics. Managers many not consider tougher issues that a more ethics-focused approach might require. © 2012 South-Western, a part of Cengage Learning

Improving Ethical Culture Top Management Leadership Moral Management Ethics Programs and Officers Realistic Objectives Ethical Decision- Making Processes Codes of Conduct Effective Communication Ethics Training Corporate Transparency Whistle-Blowing Mechanisms Ethics Audits and Risk Assessments Board of Directors’ Oversight Discipline of Violators © 2012 South-Western, a part of Cengage Learning

Effective Rewards and Discipline Pillars of Leadership Traits Moral Person Moral Manager Ethical Leadership Behaviors Decision Making Role Modeling Ethics Communication Effective Rewards and Discipline © 2012 South-Western, a part of Cengage Learning

Effective Communication of Ethics Requires Written and verbal communication Candor Fidelity Confidentiality © 2012 South-Western, a part of Cengage Learning

Features of Ethics Programs Written standards of conduct Ethics training Mechanisms to seek ethics advice or information Methods for reporting misconduct anonymously Disciplinary measures for employees who violate ethical standards Inclusion of ethical conduct in the evaluation of employee performance © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Ethics Officers Are in charge of implementing ethics initiatives in the organization. The position may be created in response to the Federal Sentencing Guidelines, which reduces penalties to those companies with ethics programs. Problem with diminishing organizational status. © 2012 South-Western, a part of Cengage Learning

Ethical Decision-Making Process © 2012 South-Western, a part of Cengage Learning

Is it legal? Is it balanced? How will it make me feel about myself? Ethics Check Is it legal? Is it balanced? How will it make me feel about myself? © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Ethics Quick Test Is the action legal? Does it comply with our values? If you do it, will you feel bad? How will it look in the newspaper? If you know it’s wrong, don’t do it. If you’re not sure, ask. Keep asking until you get an answer. © 2012 South-Western, a part of Cengage Learning

Sears’ Ethics Guidelines Is it legal? Is it within Sears’ shared beliefs and policies? Is it right/fair/appropriate? Would I want everyone to know about this? How will I feel about myself? © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Codes of Conduct A way of establishing standards of behavior and communicating them to managers and employees. The single most important element of an ethics and compliance program. A fairly recent phenomenon. Codes of conduct positively affect corporate culture. © 2012 South-Western, a part of Cengage Learning

Content of Codes of Conduct Employment practices Employee, client, and vendor information Public information/communications Conflicts of interest Relationships with vendors Environmental issues Ethical management practices Political involvement © 2012 South-Western, a part of Cengage Learning

How Codes of Conduct Influence Behavior Codes of conduct act as a Rule book Signpost Mirror Magnifying glass Shield Smoke detector Fire alarm Club © 2012 South-Western, a part of Cengage Learning

Violators of Ethics Standards Management must forcefully discipline all violators of ethical norms and standards. Many business are unwilling to discipline violators. © 2012 South-Western, a part of Cengage Learning

Ethics Hotlines and Whistle Blowing Employees must have outlets to anonymously report questionable behaviors. Hotlines are the most common way to report corporate fraud. Can be telephone, web, or email-based. © 2012 South-Western, a part of Cengage Learning

Purposes of Ethics Training Learn the fundamentals of business ethics. Learn to solve ethical dilemmas. Learn to identify causes of unethical behavior. Learn about common managerial ethical issues. Learn whistle-blowing criteria and risks. Learn to develop a code of ethics and execute an internal ethical audit. © 2012 South-Western, a part of Cengage Learning

Ethics Audits and Risk Assessments Intended to carefully review such ethics initiatives as ethics programs, codes of conduct, hotlines, and ethics training programs. Sustainability Audit Helps to identify sustainability issues within an organization. Fraud Risk Assessment Review processes that identify and monitor conditions that may pertain to the company’s exposure to compliance/misconduct risk and to review methods for dealing with concerns. © 2012 South-Western, a part of Cengage Learning

Corporate Transparency A quality, characteristic, or state in which activities, processes, practices, and decisions that take place in companies become open or visible to the outside world. The degree to which an organization: Provides public access to information. Accepts responsibility for its actions. Makes decisions more openly. Establishes incentives for leaders to uphold standards. © 2012 South-Western, a part of Cengage Learning

Board of Director Leadership and Oversight Leadership and oversight of ethical initiatives by boards is not a given. The Sarbanes-Oxley Act Companies are required to protect whistle- blowers without fear of retaliation. It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit. © 2012 South-Western, a part of Cengage Learning

From Moral Decisions to Moral Organizations Moral Managers Moral Organizations © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Key Terms Aretaic theories/principles Categorical imperative Codes of conduct Codes of ethics Compensatory justice Compliance orientation Corporate transparency Deontological theories/principles Distributive justice Ethical due process Ethics orientation Ethical tests Ethic of care Ethics audits Ethics officer Ethics programs Golden Rule Legal rights Moral rights Negative rights Opacity Positive rights Principle of justice Principle of rights Principle of utilitarianism Procedural justice Process fairness Rights Risk assessments Servant leadership Sustainability audit Teleological theories/principles Transparency Utilitarianism Virtue ethics © 2012 South-Western, a part of Cengage Learning