Business Ethics

Ethical Decision Making Framework

Helps to understand – How decision are taken within organization or in business

Factors that influence ; Ethical Issue Intensity Individual Factors Organizational Factors Opportunity Business Ethics Evaluations and Intentions Ethical or Unethical Behaviour

1- Ethical Issue Intensity

Ethical Issue; “…..” Intensity;

“perceived importance to the decision maker” EII; “the relevance or importance of an

ethical issue in the eyes of the individual, work group, and/or organization”

“reflects the ethical sensitivity of the individual or work group that faces the ethical decision making process”

Moral intensity; “person’s perception of social pressure and the harm the decision will have on others.”

Individuals cognitive state of concern about an issue Whether or not having knowledge

about an issue being ethical or unethical

Indicates their involvement in making choices

Characteristic and factors to intensity

Personal Temporal

Values, beliefs, needs, perceptions, situations, personal pressure at particular place and time

Senior employees Individuals with administrative authority Liability formula – Federal Sentencing

Guidelines

Individual factors

Six spheres that influence individual while making ethical choices Workplace Family Religion Legal system Community Profession

There level of importance shall vary depending on the perception of decision maker about the issue.

Relationship

Individuals sense of situation’s moral intensity increases individual’s perceptiveness regarding ethical problems

If an individual has high moral sensitivity then his/her perception about ethical problems will also increase.

Other Factors – Organizational settings

Management’s Incentive system

Reward Punishment

Corporate policies Values

Positive or negative incentive system can increase or decrease the perception about an ethical issue being important

Awareness level of individuals

2- Individual Factors

How will you decide an issue to be ethical or unethical in daily life? Own values and principles Socialization, religion and education

Workplace ethical issues; Honesty Conflicts of interest Discrimination Nepotism Misuse/theft of organizational resources

Individual factors that affect ethical awareness are; Gender Education Work experience Nationality Age Locus of control

3- Organizational factors

Within organizational settings – workplace is influential than individual factors.

Corporate culture Significant others Obedience to authority

Corporate culture

Set of values, beliefs, goals, norms, and ways of solving problems shared by the members (employees) of an organization of any size (for profit or non-profit).

Includes behavioural patterns, concepts, values, ceremonies, and rituals that take place in the organization.

It gives individuals meanings as well as internal rules of behaviours.

Often expressed informally Comments, wishes of top mgmt, dress code,

working hours, extracurricular activities etc.

Evaluations and Intentions

Ethical dilemma – problem solving situation Any concrete rules? In fact, Decision rules are vague and

conflicting So uncertain results of such situations

Then what is the key ! Critical thinking Responsibility for own decisions

The edge to point of no return in ethical decision making Individual’s intentions Individuals actions

If intentions and behaviours are inconsistent with ethical judgement.

Guilt! Which is first sign of unethical decision

How an individual can deal with the state of guilt ? Change their behaviour to reduce such

feelings Shift to value system that fits to decision

taken Change the decision next time Some may quit

Role of Leadership in Developing Ethics program

See exhibit 5-1 in your books

Leadership Styles

Leadership styles and attitudes can help pinpoint where future ethical issue may arise.

Leaders must have knowledge and experience to make informed choices.

Empower and involve everybody 6 styles

Coercive, authoritative, affiliative, democratic, pacesetting, coaching

Classification of Leadership styles

Transactional Attempt to create employee satisfaction

through negotiation for desired behaviour or levels of performance.

Ensure procedures and rules are in place Relationship based on situations (crisis,

reaction, conflict) rather than ethical concerns Transformational

Look for raising employees’ commitment level and encourage trust and motivation.

Communicate sense of mission and vision Enhance and generate new learning Stimulate new ways of thinking

Corporate culture

Set of values, beliefs, goals, norms, and ways of solving problems shared by the members (employees) of an organization of any size (for profit or non-profit).

Includes behavioural patterns, concepts, values, ceremonies, and rituals that take place in the organization.

It gives individuals meanings as well as internal rules of behaviours.

Often expressed informally Comments, wishes of top mgmt, dress code,

working hours, extracurricular activities etc.

Ethical Framework and Auditing Corporate Culture

Concern for people

Integrative

ExactingApathetic

CaringHigh

Low

High Low

Concern for performance

Leaders Influence on Corporate Culture

Use power and influence to shape corporate culture

Status and power of leader directly related to the pressure he/she can put on others.

Five power bases to motivate individuals ethically/unethically Reward power Coercive power Legitimate power Expert power Referent power

Reward Power

To influence an individual behaviour by offering something desirable. Money, status, promotion etc.

Useful to change behaviour in the long run.

Coercive power

Penalizes the actions or behaviours Opposite to reward power Useful in changing behaviour Short run and situational Not good in making long term

relationships Continuous coercion

Power groups formation to counterbalance Leaving organization

Legitimate power

A certain individual has right to authority

Others have obligation to accept People follow because;

Centralised structure of organization Charismatic personality of leader

Expert Power

The person’s knowledge or the perception that he/she posses knowledge

Credibility with sub ordinates Credibility and expert power

positively related to experience, education and honours.

Physicians, lawyers, consultants Advantage of others’ ignorance

Referent Power

Referential Individuals with similar objectives

influencing each other by referring to same objective.

To be successful – empathetic By identification with others, the

decision maker gets confidence

Motivating Ethical Behaviour

Motivation – force within an individual that focuses his/her behaviour toward achieving a goal.

How motivation is created? Motivation helps explain ethical

behaviour! How? Organizational level

individual’s needs/hierarchy of needs Motivation and ethical behaviour

Corporate Culture & Ethics

How corporate culture can/may support for ethical/unethical behaviour?

Ethical Conflict – the conflict between the cultural values, in theory and in practice Who develops plans in organization? Who acts on rules in organizations

Consistency in ethical culture.

Whistle Blowing

Whistle blowing - exposing an employer’s wrongdoing.

Whistle blower – an employee who discovers corporate misconduct and chooses to bring it to the attention of others.

Internal whistle blowing External whistle blowing

Ethics of Whistle blowing

Brave, honourable and people of integrity. Save organization and society

Disloyal, not trustworthy, tattletale, informers, sneakers, spies Loose cannons and troublemakers for

personal gains and egos

When is whistle blowing ethical?

Company, through a product or decision will cause serious and considerable harm to the public or break existing laws.

A serious threat of harm, should report and state the moral concerns.

Immediate supervisor doesn’t act. Employee should exhaust internal procedures and chain of command to the BoDs.

Having documented evidence that is convincing to a reasonable and impartial observer.

Valid reasons to believe that revealing wrongdoing to public will result in the changes necessary to remedy the situation.

When is whistle blowing unethical

Potential for financial gains Motivated by the opportunity financial gains

Media attention Vendetta against company

Hard to evaluate one’s intentions but the key is; Sure about your facts and evidence Irrefutable