UNETHICAL BEHAVIORS IN ORGANIZATIONS AND HUMAN NATURE Chapter One Visit for the latest in business news stories. Copyright © 2012 John Wiley & Sons

Chapter 1 Learning Objectives Explain the competitive advantages of creating and maintaining an ethical organization Appreciate that unethical behaviors occur in all organizational operations Identify common types of unethical behaviors Understand that unethical behaviors can be very costly to organizations Describe different theories of human nature and the stages of moral development Discuss why good people occasionally behave unethically Chapter 1: Collins, Business Ethics

Daily Occurrence of Ethical Dilemmas Ethics is the set of principles a person uses to determine whether an action is good or bad. People experience a multitude of ethical dilemmas on a daily basis. Almost every decision and action a person makes impacts other people. Chapter 1: Collins, Business Ethics

Daily Occurrence of Ethical Dilemmas Examples of Ethical Dilemmas: Should you arrive at work early, on time, or late? Should you submit adequate work that meets a deadline or submit the highest quality work possible and miss the deadline? Should you inform your boss about your colleague's questionable work habits? Should the organization incur additional costs for environmental protection technologies not required by law? Should you leave work at the designated time or cancel after work plans and stay late to finish a project? Chapter 1: Collins, Business Ethics

Unethical Behaviors at Work Ethics Resource Center 2009 Survey on types of ethical misconduct respondents observed most within the previous 12 months (top 5):  Company resource abuse  Abusive or intimidating behavior toward employees  Lying to employees  or internet abuse  Conflicts of interest Chapter 1: Collins, Business Ethics

Unethical Behaviors at Work These ethical misconducts were observed in both large firms and small firms, and in all sectors examined, including: Government agencies (29% reported ethical misconducts) Nonprofit organizations (26%) Publicly traded for-profit firms (25%) Privately held for-profit firms (25%) Chapter 1: Collins, Business Ethics

EVERY PROFESSION AND INDUSTRY EXPERIENCES ETHICAL PROBLEMS Unethical Behaviors at Work Accounting Auditors Legal Profession Construction Industry Public Relations Sales Government Agencies Army Personnel Medical Researchers Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Managers often underestimate the costs associated with unethical behaviors The most direct cost is lost business Other costs associated with unethical behavior: Legal costs Theft Recruitment and turnover Monitoring Reputation Abusive treatment Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Legal Costs Lawsuits are one of the most easily quantifiable costs associated with unethical behaviors The Equal Employment Opportunity Commission maintains an annual database of charges filed and resolved under various antidiscrimination laws Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Employee Theft Employees can steal money, products, or time The biggest source of retail theft is employees, not customers Theft can occur at all levels of an organization Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Monitoring Costs Organizations incur monitoring costs when they employ unethical individuals Once an employee has lied, he or she needs to be more closely monitored Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Reputation Costs An organization’s reputation is one of its most important assets Reputation management accounts for 63% of an organization’s market value Continuous negative publicity creates substantial barriers Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Abusive Treatment Costs Abusive supervision affects approximately 13% of U.S. workers Costs in terms of absenteeism, health care, and lost productivity have been estimated to be $23.8 billion annually Chapter 1: Collins, Business Ethics

Costs Associated with Unethical Behaviors Recruitment and Turnover Unethical organizations cannot be trusted Unethical organizations incur greater costs recruiting employees, customers, suppliers, and investors Chapter 1: Collins, Business Ethics

Competitive Advantages of Ethical Organizations Ethical organizations, compared to unethical organizations, are more likely to: 1. Attract and retain high-quality employees 2. Attract and retain high-quality customers 3. Attract and retain high-quality suppliers 4. Attract and retain high-quality investors 5. Earn good will with community members Chapter 1: Collins, Business Ethics

Competitive Advantages of Ethical Organizations If you were a job applicant, would you rather work for an ethical or an unethical organization? If you were a customer, would you rather purchase products or services from an ethical or unethical organization? Chapter 1: Collins, Business Ethics

Human Nature Are employees, customers, and suppliers inherently selfish or altruistic? Can they be trusted or do they have to be carefully monitored? From a managerial perspective, what are the most important features of our moral imperfection? Chapter 1: Collins, Business Ethics

Human Nature Are we: Born Good? Born with Inherited Sin? Born Morally Neutral? Chapter 1: Collins, Business Ethics

Cognitive Development Children are born into a particular family, neighborhood, and culture that influence their moral judgment Parents are a child’s most direct role model and shape the child’s environmental experiences Chapter 1: Collins, Business Ethics

Kohlberg’s Stages of Moral Development Level 1 - Pre-conventional  Obedience & punishment orientation  Instrumental Orientation Level 2 - Conventional  ‘Good Boy’-’Nice Girl’ Orientation  ‘Law-and-Order’ Orientation Level 3 - Post-Conventional  Social contract Orientation  Universal Ethical Principles Chapter 1: Collins, Business Ethics

Kohlberg’s Stages of Moral Development Preconventional Level  individual is not perceived as being part of a broad community with rules and regulations Conventional Level  societal roles and agreements matter a great deal to the individual Postconventional Level  individual delves into the principles that govern societal roles and order Chapter 1: Collins, Business Ethics

Lies and Cheating Managers need honest information from other employees and stakeholders to achieve optimal organizational performance Children lie and deceive others as soon as they can formulate alternative strategies Lying and cheating continue through high school Cheating patterns continue in college Chapter 1: Collins, Business Ethics

Lies and Cheating Chapter 1: Collins, Business Ethics Exhibit 1.3: The Day Americans Told the Truth

Why Do Good People Behave Unethically? Unintended Unethical Behaviors Choosing Between Competing Values Intentional Unethical Behaviors Failure to Report Unethical Behaviors Chapter 1: Collins, Business Ethics