© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1 Chapter 5 Ethical Decision Making Part Three The Decision Making Process

 In business, people make decisions differently than at home  Organizational pressures have a strong influence  The ethical decision making process includes  Ethical issue intensity  Individual factors  Organizational factors  The framework for ethical decision making does not describe how to make ethical decisions  Outlines the factors and processes related to ethical decision making 2 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

3 Framework for Understanding Ethical Decision Making in Business © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

The perceived relevance or importance of an ethical issue to the individual, work group, and/or organization  Reflects the ethical sensitivity of the individual and/or work group  Triggers the ethical decision making process 4 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Individuals are subject to six spheres of influence… WorkplaceLegal system FamilyCommunity ReligionProfession  Moral intensity: Relates to a person’s perception of social pressure and the harm his/her decision will have on others 5 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 People base their ethical decisions on their own values and principles of right or wrong  Values are learned through socialization  Good personal values decrease unethical behavior and increase positive work behavior  Values are subjective; vary across cultures 6 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 An organization may intend to do right, but organizational or social forces can alter this intent  Research shows that various factors influence ethical behavior  Gender—women are more ethical than men  Education, work experience, nationality, and age affect ethical decision making 7 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Relates to individual differences in relation to a general belief about how one is affected by internal versus external events or reinforcements 8 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Managers with…  External locus of control go with the flow because that’s all they can do  Internal locus of control believe they can control events; are masters of their destinies and trust in their capacity to influence their environment  Unclear relationship between locus of control and ethical decision making 9 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Organizational culture has a stronger influence on employees than individual values  Corporate culture: A set of values, norms, and artifacts that members of an organization share  Ethical culture: Reflects whether the firm has an ethical conscience; is a function of many factors 10 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Significant others: Those who have influence in a work group  Obedience to authority: Helps to explain why many employees unquestioningly follow superior’s orders 11 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

The conditions in an organization that limit/permit ethical/unethical behavior  Immediate job context: Where employees work, with whom they work, and the nature of the work 12 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Opportunities for misconduct can be reduced by establishing formal codes, policies, and rules  Aggressive enforcement is required  Knowledge can sometimes lead to unethical behavior  A person who has an information base, expertise, or information about competition has an opportunity to exploit knowledge 13 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

14 Most Common Office Supplies Stolen by Employees © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Source: “Top Office Supplies that Are Stolen and the Average Value of Contents In A Woman’s Purse!” KMLE, May 16, 2012, p-office-supplies-that-are-stolen/ (accessed April 12, 2013). 1. Post-It notes 2. Tape 3. Scissors 4. Toilet paper 5. Copier paper 6. USB memory sticks 7. Notepads 8. Pens 9. Staplers 10. Highlighters

Ethical dilemmas involve situations where rules are vague or in conflict  Critical thinking skills and ability to take responsibility are important  The final step is deciding what action to take based on a person’s intentions  Guilt or uneasiness is the first sign that an unethical decision has occurred  Most businesspeople will make ethical mistakes 15 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Impossible to objectively determine if a business decision is right or wrong  Understanding how ethical decisions are made will not solve ethical problems  Business ethics involves value judgments and collective agreement about acceptable patterns of behavior  Ethical decision making in business does not rely on personal values and morals  Organizations take on cultures of their own  Informal relationships enforce an ethical culture 16 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Normative approaches: How organizational decision makers should approach an issue  Different from a descriptive approach that examines how organizational decision makers approach ethical decision making  Concepts like fairness and justice are highly important in a normative structure 17 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Most organizations develop a set of core values to provide enduring beliefs about appropriate conduct  Core values are central to an organization and provide direction for action  By incorporating stakeholder objectives into corporate core values, companies begin to view stakeholders as significant 18 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Institutions are important in establishing a foundation for normative values  Organizations face certain normative pressures from different institutions to act a certain way  Internally and/or externally  Sort institutions into three categories: Political, economic, and social 19 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Political influences can take place within the organization  An ethical organization has policies and rules in place to determine appropriate behavior  Often the compliance component of the firm’s organizational culture  Failure to abide by these rules results in disciplinary action 20 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Normative business ethics takes into account the political realities outside the legal realm in the form of industry standards  Legal issues such as price fixing, antitrust issues, and consumer protection are important in maintaining a fair and equitable marketplace  These issues must be major considerations for business when making ethical decisions 21 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Competition affects how a company operates as well as the risks employees take for the good of the firm  Amount of competition in an industry can be determined/described according to…  Barriers to entry into the industry  Available substitutes for the products produced by the industry rivals  Power of the industry rivals over their customers  Power of the industry rivals’ suppliers over the industry rivals 22 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Social institutions include religion, education, and individuals such as the family unit  There are laws meant to ensure an organization acts fairly, but there are no laws saying people should do to others as they would prefer to have done to them  Many cultures adopt this rule that has been institutionalized into businesses with standards on competing fairly, being transparent with consumers, and treating employees with respect 23 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Industry shared values promote organizational effectiveness when linked to goals  Can also hinder effectiveness if more efficient means of organization and structure are avoided in exchange for stability  Risk that organizations might sacrifice new ideas or methodologies in order to be more acceptable  Can limit innovativeness and productivity  Important that organization does not stray too far from industry norms and values 24 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 When values from political, economic, and social institutions are embedded into the organizational culture to provide incentives for appropriate behavior, firms tend to act more socially responsible  If incentives do not align with institutional normative values or if they contradict these values, then misconduct is likely 25 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 John Rawls was one of the most influential philosophers in his research on how principles support the concept of justice  Veil of ignorance: A thought experiment that examined how individuals would formulate principles if they did not know what their future position in society would be  Identified principles that were not biased by one’s social position 26 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Two main principles of justice…  Liberty principle (equality principle): States that each person has basic rights that are compatible to the basic liberties of others  Difference principle: States that economic and social equalities (or inequalities) should be arranged to provide the most benefit to the least- advantaged members of society  Does not advocate for the complete elimination of inequalities in society  The most ethical decision seeks to benefit and not harm disadvantaged populations 27 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Companies take basic principles and translate them into core values  Core values provide the abstract ideals that are distinct from individual values and daily operational procedures  Value practices evolve and are translated into normative definitions of ethical or unethical  Individual and organizational values can differ significantly because of ethical diversity among individuals 28 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 Leaders, stakeholders, and the organizational culture impact the development of core values  A firm’s core values provide a blueprint into the firm’s purpose as well as how it views ethical decision making and prioritizes stakeholders  Organizations that have ethics programs based on a values orientation are found to make a greater contribution than those based simply on compliance 29 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

30 Principles and Values © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

31 Core Values of Marriott © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1. Put People First 2. Pursue Excellence 3. Embrace Change 4. Act with Integrity 5. Serve Our World Source: Marriott, 2011 Annual Report, (accessed April 19, 2013).

Ethical issue intensity, individual factors, and opportunity result in business ethics evaluations and decisions  An organizational ethical culture is shaped by effective leadership  Top level support is required for ethical behavior  An ethical corporate culture needs shared values and proper oversight  The more you know about ethical decision making, the more likely you will be to make good decisions 32 © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.