Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 03 Managing Ethics and Diversity

3-2 Learning Objectives Illustrate how ethics help managers determine the right way to behave when dealing with different stakeholder groups Explain why managers should behave ethically and strive to create ethical organizational cultures Appreciate the increasing diversity of the workforce and of the organization environment

3-3 Learning Objectives Grasp the central role that managers play in the effective management of diversity Understand why the effective management of diversity is both an ethical and a business imperative Understand the two major forms of sexual harassment and how they can be eliminated

3-4 The Nature of Ethics Ethical dilemma: Quandary people find themselves in when they have to decide if they should act in a way that might help another person or group even though doing so might go against their own self- interest

3-5 The Nature of Ethics Ethics: Inner-guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the “right” or appropriate way to behave Ethics indicate inappropriate behavior and how a person should behave to avoid harming another person. The essential problem in dealing with ethical issues is that there are no absolute or indisputable rules or principles can be developed to decide if an action is ethical or unethical.

3-6 Ethics and the Law Laws and ethics are not fixed principles. Ethical beliefs change over time, and as they do, laws also change to reflect the changing ethical beliefs of a society.. “Do unto others as you would have them do unto you” is a commonly used ethical or moral rule that continues to be useful.

3-7 Changes in Ethics over Time Many behaviors, such as murder, theft, and rape that people find totally unacceptable should remain illegal. However, there are other actions and behaviors whose ethical nature is open to dispute. Examples include gun possession or the use of tobacco.. It is important to note that laws themselves change as ethical beliefs change. There is no absolute or unvarying standard to determine how we should behave. In the 2000s, scandals such as Enron, WorldCom, and Tyco broke the law and used illegal and unethical means to defraud investors Not being illegal does not make behavior ethical

* Ethical behavior * Accepted principles of right and wrong * Workplace deviance * Unethical behavior that violates organizational norms about right and wrong * Production deviance-hurts the quality and quantity of work produced. * Property deviance-unethical behavior aimed at company property or products. * Political deviance-using one’s influence to harm others. * Personal aggression-hostile or aggressive behavior. 8

9 Source: Republished with permission of Academy of Management, P.O.Box 3020, Briar Cliff Manor, NY, “A Typology of Deviant Workplace Behaviors,” (Figure), S. L. Robinson & R. J. Bennett. Academy of Management Journal, 1995, Vol. 38. Reproduced by permission of the publisher via Copyright Clearance Center, Inc. 62 P a r t 1 : I n t r o d u c t i o n t o M a n a g e m e n t 1.1

3-10 Stakeholders and Ethics Stakeholders: People and groups that supply a company with its productive resources and so have a claim on and stake in the company Stakeholders can directly benefit or be harmed by an organizations actions, the ethics of a company and its managers are important to them

3-11 Figure Types of Company Stakeholders

3-12 Stockholders Stockholders have a claim on a company because when they buy its stock, they become its owners. Stockholders are interested in the way a company operates because they want to maximize their return on investment. They want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation

3-13 Managers Responsible for using a company’s financial, capital and human resources to increase its performance Have the right to expect a good return or reward by investing their human capital to improve a company’s performance Difficult decisions challenge managers to uphold ethical values

3-14 Question Is it ethical for managers to receive vast amounts of money from their companies? A. Yes B. No C. Sometimes D. Never

3-15 Employees Employees expect to receive rewards consistent with their performance. A company can act ethically towards its employees by creating an occupational structure that rewards them fairly and ethically.

3-16 Suppliers and Distributors Suppliers expect to be paid fairly and promptly for their inputs Distributors expect to receive quality products at agreed-upon prices

3-17 Customers Most critical stakeholder group Managers work very hard to create loyal customers, attract new ones, and improve the products that they sell to customers over time

3-18 Community, Society, and Nation The effects of the decisions made by companies and their managers permeate all aspects of the communities, societies, and nations in which they operate Community - Physical locations like towns or cities or to social milieus like ethnic neighborhoods in which companies are located Through the salaries, wages, and taxes it pays, a company contributes to the economy of the town or region in which it resides and often determines whether it prospers or declines. Companies affect the prosperity of a society and a nation, and to the extent that a company is involved in global trade, it affects the prosperity of the global economy.

19 Ethical Answers Depend on… Ethical Intensity of Decision Moral Development of Manager Ethical Principles Used 3 3

20 Concentration of effect Magnitude of consequences Social consensus Probability of effect Proximity of effect Temporal immediacy 3.1

21PreconventionalPreconventional 1.Punishment and Obedience 2.Instrumental Exchange 1.Punishment and Obedience 2.Instrumental ExchangeConventionalConventional 3.Good boy, nice girl 4.Law and order 3.Good boy, nice girl 4.Law and orderPostconventionalPostconventional 5.Social contract 6.Universal principle 5.Social contract 6.Universal principle 3.2 Self-InterestSocietal Expectations Internalized Principles

* Magnitude of consequences -the total harm or benefit derived from an ethical decision. * Social consensus -agreement on whether behavior is good or bad. * Probability of effect -the chance that something will happen and then result in harm to others. * Temporal immediacy -the time between an act and the consequences. * Proximity of effect -the social, psychological, cultural, or physical distance of a decision maker from those affected by his decision. * Concentration of effect -how much an act affects the average person. 22

3-23 Figure Four Ethical Rules

3-24 Rules for Ethical Decision Making The utilitarian rule defines an ethical decision as one that produces the greatest good for the greatest number of people. Therefore, managers should consider how different courses of action can benefit or harm stakeholders, and implement the one with the most benefits. The moral rights rule defines an ethical decision as one that best maintains and protects the fundamental rights and privileges of the people affected by it. Therefore, managers should compare and contrast alternative courses of action based on the effect of those alternatives on stakeholders’ rights.

3-25 Rules for Ethical Decision Making The justice rule defines an ethical decision as one that distributes benefits and harms among stakeholders in a fair, equitable or impartial way. Therefore, managers should compare and contrast alternative courses of action based on the degree to which the action will promote a fair distribution of outcome to stakeholders.

3-26 Practical Decision Model The practical rule defines an ethical decision as one that a manager has no hesitation communicating to others both inside and outside of the company because they would find it acceptable. A manager can assume a decision is ethical if he or she can answer ‘yes’ to the following three questions: Does my decision fall within the accepted values or standards that typically apply in business activity today? Am I willing to see the decision communicated to all people and groups affected by it—for example, by having it reported in newspapers or on television? Would the people with whom I have a significant personal relationship, such as family members, friends, or even managers in other organizations, approve of the decision?

3-27 Why Should Managers Behave Ethically? The relentless pursuit of self-interest can lead to a collective disaster if individuals start to profit from being unethical, encouraging other people to act in the same way. The pursuit of individual self-interest with no consideration of societal interests leads to disaster for each individual and for the whole society because scarce resources are destroyed. This situation is called the ‘tragedy of the commons.” Unethical behavior ruins business commerce, and society has a lower standard of living because fewer goods and services are produced.

3-28 Why Should Managers Behave Ethically? When stakeholders believe that they are dealing with others who are basically moral and honest, trust exists. Over time, trust between stakeholders allows them to work together more efficiently and effectively, thus raising company performance. As people see the positive results of acting in an honest way, ethical behavior becomes a valued social norm. If other individuals or groups copy the behavior of the unethical stakeholder, the rate at which collective resources are misused increases, and eventually there will be only few resources available for producing goods and services.

3-29 Why Should Managers Behave Ethically? Reputation is the esteem or high repute that individuals or organizations gain when they behave ethically. If a manager misuses resources and if other parties regard that behavior as being at odds with acceptable standards, the manager’s reputation will suffer.

3-30 Figure Some Effects of Ethical and Unethical Behavior

3-31 Why Should Managers behave Ethically? Trust: Willingness of one person or group to have faith or confidence in the goodwill of another person, even though this puts them at risk Reputation: Esteem or high repute that individuals or organizations gain when they behave ethically

3-32 Question What is confidence and faith in another person’s goodwill? A. Reputation B. Trust C. Empathy D. Hope

3-33 Sources of an Organization’s Code of Ethics Codes of ethics are formal standards and rules, based upon beliefs about right or wrong, that managers can use to help themselves make appropriate decisions concerning the interests of their stakeholders. An organization’s code of ethics is derived from three principal sources in the organizational environment. They are societal ethics, professional ethics, and individual ethics.

3-34 Sources of an Organization’s Code of Ethics Societal ethics are standards that govern how members of a society deal with each other in matters involving issues such as fairness, justice, poverty, and the rights of the individual. Societal ethics emanate from a society’s laws, customs, and practices, and from unwritten attitudes, values, and norms that influence how people interact with each other.

3-35 Sources of an Organization’s Code of Ethics Professional ethics are standards that govern how members of a profession, including managers or workers, make decisions when the way in which they should behave is not clear-cut. Individual ethics are personal values (both terminal and instrumental) and attitudes that govern how individuals interact with other people. Sources of one’s individual ethics include the influence of family, peers, personality, and experience.

3-36 Figure Sources of an Organization’s Code of Ethics

3-37 Ethical Organizational Cultures * Managers must ensure that important ethical norms and values are central components of the organization’s culture. * Employees expect those in become role models of ethical conduct, knowing that subordinates scrutinize their behavior. * Organizations can encourage an ethical culture by creating the role of ethics officer, or ethics ombudsman. * The ethics ombudsman is responsible for communicating ethical standards to all employees, designing systems to monitor employees’ conformity to those standards, and teaching all employees how to respond to ethical dilemmas appropriately.

3-38 Ethical Organizational Cultures Ethics ombudsman: Ethics officer who monitors an organization’s practices and procedures to be sure they are ethical

3-39 Diversity of the Workforce and the Environment Diversity: Differences among people in age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background, and capabilities/disabilities Managing diversity fairly and justly can improve organizational effectiveness Diversity is a critical issue in organizations for the following reasons: There is a strong ethical imperative in many societies that diverse people must receive equal opportunities and be treated fairly and justly. Unfair treatment is illegal. Effective management of organizational diversity can improve organizational effectiveness. There is substantial evidence that diverse individuals continue to experience unfair treatment in the workplace as a result of biases, stereotypes, and overt discrimination.

40 DiversityAffirmative Action * May exist without a program * Broad focus * Not legally based * Create a positive work environment * Generally accepted  A purposeful, established program  Narrow focus  Legal requirement  Compensate for past discrimination  Controversial 1.1

41 To create a positive work environment where…  no one is advantaged or disadvantaged  “we” is everyone.  everyone can do his or her best work.  differences are respected and not ignored.  everyone feels comfortable. 1.1

3-42 Diversity Concerns The ethical imperative for equal opportunity The continuing bias toward diverse individuals Glass ceiling: Metaphor alluding to the invisible barriers that prevent minorities and women from being promoted to top corporate positions The federal Glass Ceiling Commission Report indicated that African Americans have the hardest time climbing the corporate ladder, Asians are often stereotyped into technical jobs, and Hispanics are assumed to be less educated than other minority groups.

3-43 Question What is the metaphorical barrier that prevents minorities and women from being promoted to top corporate positions? A. Gender barrier B. Gender prejudice C. Glass ceiling D. Glass top

3-44 Figure Sources of Diversity in the Workplace

3-45 Workforce Diversity: Age Aging U.S. population By 2030, 20 percent of the population will be over 65 Federal age discrimination laws 1964Title VII of the Civil Rights Act of Age Discrimination in Employment Act The aging of the population suggests managers need to be vigilant in ensuring that employees are not discriminated against because of age. Effectively managing diversity means employees of diverse ages are able to learn from each other.

46 * Treating people differently because of their age * Performance does not decline with age * Older employees show better judgment, and are less likely to quit, show up late, or be absent * Age discrimination is more pervasive than managers think 2.1

3-47 Workforce Diversity: Gender Women in the work place U.S. workforce is 46.5 % percent female Women’s weekly median earnings are $638 compared to $798 for men Women hold only 15.4% of corporate officer positions Equal employment opportunity law 1963Equal Pay Act * Although women and men are almost equally represented in the U.S., the median weekly earnings of women are estimated to be lesser than the earnings of men. Thus the gender pay gap appears to be as alive and well as the glass ceiling. Research suggests that female executives outperform their male colleagues in skills such as motivating others, promoting good communication, turning out high quality work, and being a good listener.

48 Labor Force and Gender Distributions LABOR FORCE PARTICIPATION RATE BY SEX, PROJECTED 1950–2012 Continuing a historical trend, the labor force participation rate for men will decline as the rate for women increases. LABOR FORCE GROWTH BY SEX, PROJECTED 2002–2012 The number of women in the labor force is expected to grow at a higher rate than that for men. Source: U.S. Department of Labor

49 2.2

3-50 Workforce Diversity: Race and Ethnicity Racial and ethnic diversity of the U.S. population is increasing at an exponential rate Emphasizes the importance of effectively managing diversity * U.S. Census Bureau treats ethnicity in terms of whether a person is Hispanic, Latino, or of Spanish origin or not. * a. The racial and ethnic diversity of the U.S. population is increasing an exponential rate, as is the composition of the workforce.

51

52 * Growth of the U.S. Minority Population Source: U.S. Census Bureau

3-53 Workforce Diversity: Religion Title VII of the Civil Rights Act prohibits discrimination based on religion, as well as based on race/ethnicity, country of origin, sex, and color. Accommodation for religious beliefs Scheduling of critical meetings Providing flexible time off for holy days Posting holy days for different religions on the company calendar Even small accommodations for religious diversity often enhances employee loyalty

54 * Amric Singh filed a lawsuit against Manhattan’s police department claiming he was fired for wearing a turban on the job. 3 3

3-55 Workforce Diversity: Capabilities and Disabilities Americans with Disabilities Act (ADA) of 1990 prohibits discrimination against persons with disabilities Accommodation towards disability Providing reasonable accommodations for individuals with disabilities Promoting a nondiscriminatory workplace environment Educating the organization about disabilities and AIDS

56 Physical changes Quieter workspace Training and other written materials TTYs for use with telephones, computer hardware and software Time off for treatment 2.4

3-57 Workforce Diversity: Socioeconomic Background Refers to a combination of social class and income- related factors. Socioeconomic diversity requires managers to be sensitive and responsible to the needs and concerns of employees who are not as well off as others. Requires managers to be sensitive and responsive to the needs and concerns of those less privileged Concerns Widening diversity in income levels Single mothers and the “working poor” Child and elder care for working parents

3-58 Sexual Orientation Approximately 2 to 10% of the U.S. population is gay or lesbian. a. An increasing number of organizations recognize the minority status of gay and lesbian employees, affirm their right to fair and equal treatment, and provide benefits to same-sex partners.

3-59 Other Kinds of Diversity Organizations and teams need members with diverse backgrounds and experiences. a. This is illustrated by the prevalence of cross- functional teams in organizations whose members might come from various departments such as marketing, production, finance, etc. b. Employees differ from each other in how attractive they are, based upon the standard of the culture in which the organization operates, and in body weight.

3-60 Workforce Diversity: Sexual Orientation Fair and equal treatment towards the minority group of gays and lesbians Provision of domestic-partner benefits

3-61 Critical Managerial Roles * Managers can either promote or derail the effective management of diversity. 1. By using their formal authority to support diversity, managers can influence other members of the organization to make the same commitment. Managerial commitment to diversity legitimizes the diversity management efforts of others. 2. Seeing managers express confidence in the abilities and talents of diverse employees causes other organizational members to adopt similar attitudes and helps reduce misconceptions rooted in ignorance or stereotypes. 3. Research suggests that slight differences in treatment of diverse organizational members based upon race, gender, ethnicity or other factors can accumulate to result in major disparities over time. Therefore, managers must ensure that such disparities do not occur and are not tolerated.

3-62 Effectively Managing Diversity Makes Good Business Sense * 1. The diversity of organizational members can be a source of competitive advantage. The variety of points of view that diverse employees provide can improve managerial decision making. * 2. Diverse members of an organization are likely to be attuned to what goods and services diverse segments of the market do and do not want. * 3. The recruiting of diverse employees must be followed up with ongoing effective management of diversity to retain those employees. It helps the company avoid the costs related to the hiring of replacements of members of diverse groups who, once hired, think that they are being unfairly treated. * 4. Many organizations also insist that their suppliers support diversity. * 5. Effective management of diversity is necessary to avoid costly lawsuits.

3-63 Forms of Sexual Harassment * Sexual harassment seriously damages both the people who are harassed and the reputation of the organization in which it occurs. While victims can be either men or women, women are the most frequent. There are two forms of sexual harassment: Quid pro quo: Asking or forcing an employee to perform sexual favors in exchange for some reward or to avoid negative consequences Hostile work environment: Telling lewd jokes, displaying pornography, making sexually oriented remarks about someone’s personal appearance, and other sex-related actions that make the work environment unpleasant

3-64 Steps to Eradicate Sexual Harassment Develop and clearly communicate a sexual harassment policy endorsed by top management Use a fair complaint to investigate charges of sexual harassment When it has been determined that sexual harassment has taken place, take corrective action as soon as possible Provide sexual harassment education and training to all organizational members, including managers

65 Surface-Level Diversity Age Race/Ethnicity Gender Deep-Level Diversity PersonalityAttitudes Values/Beliefs PhysicalCapabilities