1 Chapter Six Leadership Ethics and Social Responsibility © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2 Learning Objectives  Specify key principles of ethical and moral leadership.  Apply a guide to ethical decision making.  Present representative examples of unethical behavior by business leaders.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Learning Objectives (cont’d)  Describe what leaders can do to foster an ethical and socially responsible organization.  Explain the link between business ethics and organizational performance.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 Ethics and Morals  Ethics is the study of moral obligations, or of separating right from wrong Ethics can also mean the accepted guidelines of behavior for groups or institutions  Morals are an individual’s determination of what is right or wrong and are influenced by an individual’s values

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Ethical Leadership Behaviors 1. Be honest and trustworthy and have integrity in dealing with others 2. Pay attention to all stakeholders 3. Build community 4. Respect the individual 5. Accomplish silent victories

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Factors Contributing to Ethical Differences 1.The leader’s level of greed, gluttony, and avarice 2.Rationalization 3.Implied permission to engage in unethical acts 4.The leader’s level of moral development Preconventional level Conventional level Postconventional level 5.A sense of entitlement 6.The situation and organizational culture 7.The leader’s character

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Extraordinary Executive Compensation

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Executive Compensation in the U.S. The average CEO pay at major corporations is now 364 times higher than the lowest-paid employees.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 The Ethical Mind for Leaders  To remain ethical, leaders need to develop an ethical mindset, or point of view  Leader’s need to state this viewpoint and apply it rigorously, using self-checks along the way  Leader’s must act quickly and publicly on lapses of ethical behavior of others  The ethical mind of the leader is essential for the overall health of the organization

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 Evaluating Ethics of a Decision Guidelines  Is it right?  Is it fair?  Who gets hurt?  Would you be comfortable if the details of your decision or actions were made public?  What would you tell your child, sibling, or young relatives to do?  What does your intuition tell you?

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 Examples of Unethical Leaders (From Table 6- 3)  Dennis Kozlowski, Tyco  Bernie Ebbers, MCI  Patricia Dunn, Hewlett-Packard  Frank Quattrone, Crédit Suisse  Steven Jobs, Apple  Chung Mong-koo, Hyundai  Martha Stewart, Martha Stewart Living

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Social Responsibility  Having obligations to society beyond the company’s economic obligations to owners or stockholders and also beyond those prescribed by law or contract  Relates to an organization’s impact on society and goes beyond doing what is ethical

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Socially Responsible Actions  Creating a pleasant workplace  Guarding the environment  Engaging in philanthropy  Working with suppliers to improve working conditions

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Creating an Ethical and Socially Responsible Culture  Providing strategic leadership of ethics and social responsibility  Establishing written codes of ethical conduct  Developing formal mechanisms for dealing with ethical problems  Accepting whistleblowers  Providing training in ethics and social responsibility  Placing company interests over personal interests

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 Ethics and Performance  High ethics and social responsibility are related to good financial performance  The relationship between social responsibility and financial performance may be a virtuous circle. Corporate social responsibility and corporate financial performance may feed and reinforce each other

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 Summary  Key principles of ethical leadership include having honesty and integrity, paying attention to all stakeholders, building community, respecting the individual, and accomplishing silent victories

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Summary (cont’d)  Examples of factors contributing to how one person’s ethics differ from another include: the person’s level of greed, gluttony, and avarice, the person’s level of moral development, the person’s sense of entitlement, the situation itself, combined with the corporate culture, and/or the person’s character.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18 Summary (cont’d)  A leader or manager should seek answers to a series of important questions before reaching a decision about an issue that is not clearly ethical or unethical  Unethical behaviors have had detrimental effects on many companies

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Summary (cont’d)  A leader can encourage ethical behavior by promoting social responsibility  Ethical behavior is related to financial performance