Chapter 7 Business Ethics

Deontologist

A marketing manager who orders that a manufacturing plant be refitted to make it safer for workers, no matter what the cost, may be a(n) because he believes in the rights of all individuals.

utilitarian

A person who offers a facilitation payment in order to secure a contract that will keep her company from going bankrupt and laying off hundreds of employees may be a(n)

may change his/her values and ethical behavior.

According to Kohlberg's model, as a person progresses through the stages of moral development, and with time, education, and experience, he/she

centralized organization

Although both structure can create opportunities for unethical conduct, which organizational structure tends to be more ethical?

Relativist

An individual who believes that an action is ethical because others within his or her company and industry regularly engage in the activity is probably a(n)

Social system and conscience maintenance

An individual who defines what is right by considering his/her duty to society, not just to other specific people, is in which of Kohlberg's stages of cognitive moral development?

Decentralized

An organization that delegates decision-making authority as far down the chain of command as possible and has relatively few formal rules is

Teleology

Which moral philosophy considers an act to be morally right or acceptable if it produces some desired result?

qui tam relator

If an employee provides information to the government about a company's wrongdoing under the Federal False Claims Act, the whistle-blower. Upon investigation of the matter by the U.S. Department of Justice, the whistle-blower can receive between 15 or 25 percent of the recovered funds, depending upon how instrumental his or her claims were in holding the firm accountable for its wrongdoing.

Deontology

Kant's categorical imperative and the Golden Rule are examples of which moral philosophy?

group norms

Standards of behavior expected from group members. Just as corporate culture establishes behavior guidelines for an organization's members, group norms help define acceptable and unacceptable behavior within a group. For example, group members may punish an employee who reports to a supervisor that a coworker has covered up a serious productive error. Other members of the group may glare at the informant and refuse to talk to or sit next to him or her. These employees may complain to management or the offending group. If they believe management is not taking corrective action they too, may begin to use social networking of personal use, thus hurting the organization's productivity.

The relativist perspective

Through time an act can come to be viewed as unethical under which of the following philosophies and perspectives?

Prior rights, social contract, or utility (5th stage)

When a person defines right and wrong on the basis of legal contracts, he or she is using which of Kohlberg's stages of development?

Motivation

a force within the individual that focuses his or her behavior toward achieving a goal. To create motivation, an organization offers positive incentives that encourage employees to work toward organizational objectives. It has been found that selection and training as well as job design and employee involvement improve principled ethical cultures. Motivation incentives should not create ambiguous opportunities for misconduct.

reward power

a person's ability to influence the behavior of others by offering them something desirable. Typical rewards might be money, status, or promotion. For example, an auto salesperson who has two cars ( a Toyota and a Kia) for sale.

Expert power usually stems from

a superior's credibility with his or her subordinates.

cultural audit

an assessment of an organization's values. The audit is usually conducted by outside consultants but may be performed internally as well. Communication about ethical expectations and support from top management help to identify a corporate culture that encourages ethical conduct or leads to ethical conflict.

values-based ethics culture

approach to ethical corporate cultures relies upon an explicit mission statement that defines the core values of the firm and how customers and employees should be treated. The board of directors as well as upper management might add to the general value statements by formulating specific value statements for its strategic business units (SBU), which can be organized by product, geography, or function within the firm's management structure. IKEA represents a value-based culture, with a mission "to create a better everyday life for the many people." Not only does IKEA sell eco-friendly products and use alternative energy to power its stores, it also supports numerous causes such as the empowerment of women, the United Nations' refugee agency, UNICEF, and Save the Children.

Enlightened egoism

centers on one's longterm selfinterest but takes others' wellbeing into account.

integrative culture

combines a high concern for people and performance. An organization becomes integrative when superiors recognize employees are more than interchangeable parts employees have an ineffable quality that helps the firm meet its performance criteria. BCG is a financially successful global consulting firm with a strong reputation that specializes in business strategy. The company values employees and creates significant mentorship opportunities and extensive training that allow employees to develop rapidly. BCG offers on demand virtual learning, personalized mentorship, on-the-job coaching, and training as well as free snacks, breakfast foods, beverages, Weight Watchers meetings, and fitness classes.

Job Performance

considered to be a function of ability and motivation and can be represented by the equation (job performance = ability x motivation). On the other hand, there is a danger that compensation and performance incentives can damage the ethical climate. For example, a person who aspires to higher positions in an organization may find loopholes and manipulate them to gain a financial or performance incentive.

Sarbanes-Oxley 404

contains the characteristics of an ethical corporate culture and requires that management assess the effectiveness of the organization's internal controls and forces firms to adopt a set of values that must form a portion of the company's culture. Section 406 also requires a code of ethics for top financial officers. Many consultants that filled the need of companies wanting to comply with Sarbanes-Oxley lacked understanding of what "culture" means in this case. Management and the board demonstrate their commitment to integrity, core values, and ethics codes through their communications and actions. Every employee is encourage and required to have hands-on involvement in compliance, especially internal control systems and reporting systems. Ethical leadership should start with the tone at the top. Employees are expected to receive communication through resolutions and corrective actions related to ethical issues. Employees have the ability to report policy expectations anonymously to any member of the organization, including the CEO, other members of management, and the board of directors.

growth needs

creative or productive activities. For example, junior executives might inflate purchase or sales orders, overbill time worked on projects, or accept cash gratuities if they are worried about providing for their families' basic physical necessities.

decentralized organization

decision making authority is delegated as far down the chain of command as possible. As a result, one of the main strengths of decentralized organizations is their adaptability and early recognition of external change. A parallel weakness of decentralized organizations is the difficulty in responding quickly to changes in policy and procedures established by top management. For example, the marketing department is responsible for actual revenue generation through new product development, service, sales, advertising and promotion, pricing decisions, etc. If the sales sub-culture is not in line with the overall ethical culture of the organization, misconduct may be isolated in one department or division and hard to uncover.

centralized organization

decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels. If the centralized organizations bureaucratic, some employees may behave according to the letter of the law rather than the spirit. Some companies' use of sweatshop labor may be one manifestation of this lack of upward communication. Sweatshops produce products such as clothing by employing laborers, sometimes through forced immigrant labor, who often work 12 to 16-hour shifts for little or no pay.

Kohlberg's six stages of cognitive moral development can be reduced to three levels of ethical concern. Persons at the second level

define right as that which conforms to the expectations of good behavior of the larger society.

formal group

defined as an assembly of individuals with an organized structure that is explicitly accepted by the group. A committee is an excellent example of a situation that coworkers and significant others within the organization can use to influence ethical decisions. In this respect, minority views on issues such as ethics can be pushed aside through the majority's authority.

informal group

defined as two or more individuals with a common interest but without an explicit organizational structure. For example, four or five people with similar tastes in outdoor activities and music may discuss their interests while working and may meet outside work for dinner, concerts, sports events, or other activities. One way an employee can determine acceptable behavior is to ask friends and peers in informal groups about the consequences of certain actions such as lying to a customer about a product safety issue.

expert power

derived from a person's knowledge (or a perception that a person possesses knowledge). Expert power usually stems from a superior's credibility with subordinates. A relatively low-level secretary may have expert power because he or she knows specific details about how the business operates and can even make suggestions on how to inflate revenue through expense reimbursements. Physicians, lawyers, and consultants can take unfair advantage of unknowing clients, for example. Accounting firms may gain extra income by ignoring concerns about the accuracy of financial data they examine in an audit.

coercive power

essentially the opposite of reward power. Instead of rewarding a person for doing something, coercive power penalizes actions or behavior. As an example, suppose a valuable client asks an industrial salesperson for a bribe and insinuates he will take his business elsewhere if his demands are not met. Coercive power relies on fear to change behavior. For this reason, it has been found to be more effective in changing behavior in the short run than in the long run. However, people continually subjected to coercion may seek a counterbalance and align themselves with other, more powerful persons or leave the organization.

caring culture

exhibits high concern for people but minimal concern for performance issues. From an ethical standpoint, the caring culture seems appealing. However, it is difficult to find nationally recognizable companies that maintain little or no concern for performance.

whistle-blowing

exposing an employer's wrongdoing to outsiders such as the media or government regulatory agencies. The term whistle-blowing is sometimes used to refer to internal reporting of misconduct to management, especially through anonymous reporting mechanisms often hotlines. The Corporate and Criminal Fraud Accountability Act protects employees of publicly traded firms retaliation if they report violations of any rule or regulation to the Securities and Exchange Commission or any provision of federal law relating to fraud against shareholders.

Adam Smith

is considered the father of free market capitalism. He believed that business was and should be guided by the morals of good men.

referent power

may exist when one person perceives that his or her goals or objectives are similar to another's. The second person may attempt to influence the first to take actions that allows both to achieve their objectives. Consider the following situation: Lisa Jones, a manager in the accounting department of a manufacturing firm is pressured to increase of rate of processing sales. She asked Michael Wong, a salesperson, to speed up the delivery of sales contracts and, if possible, encourage advanced sales with delayed delivery. She invites Michael to lunch and they discuss with their work concern, including the problem of increasing sales for accounting purposes. He agrees to give it a try and within several weeks the contracts are moving faster and sales increase for the next quarter. For example, a manger who forces an employee to choose between staying home with a sick child and keeping a job is using coercive power and creating a direct conflict with the employee's values.

compliance culture

organized around risk. Compliance-based cultures uses a legalistic approach to ethics. They uses laws and regulatory rules to create compliance codes and requirements. Codes of conduct are established with compliance as their focus, with rules and polices enforced by management. The compliance approach is good in the short term because it helps management, stakeholders, and legal agencies ensure laws, rules, and the intent of compliance are fulfilled. A problem with the compliance approach, however, is its lack of long-term focus on values and integrity. In addition, it does not teach employees to navigate ethical gray area.

relatedness needs

satisfied by social and interpersonal relationships. An individual's hierarchy of needs may influence his or her motivation and ethical behavior.

exacting culture

shows little concern for people but a high concern for performance; it focuses on the interests of the organization. United Parcel Service has always been exacting. With over 10 million daily customer in over 220 countries and territories, UPS knows exactly how many employees it takes to move over 19 million packages per day worldwide. Despite its expectations for high performance, for example, UPS offers employees a number of employee benefits, including tuition assistance and health and wellness programs.

apathetic culture

shows minimal concern for either people or performance. In this culture, individuals focus on their own self-interest. In this culture, individuals focus on their own self-interest. Steel companies and airlines were among the first to freeze employee pensions to keep their businesses operating. Simple gestures of appreciation, such as anniversary watches, rings, dinners, or birthday cards for family members, are being dropped.

legitimate power

stems from the belief that a certain person has the right to exert influence and certain others have an obligation to accept it. Betty Vinson, an accountant at WorldCom, objected to her supervisor's requests to produce improper accounting entries in an effort to conceal the company's deteriorating financial condition. She and other WorldCom accountants eventually pled guilty to conspiracy and fraud. In business, if a superior tells an employee to increase sales "no matter what it takes" and that employee has a strong affiliation to legitimate power, the employee may try anything to fulfill that order. Dysfunctional leaders are defined as abusive and threat employees with contempt and disrespect can use legitimate power to pressure subordinates into unethical conduct.

differential association

the idea that people learn ethical or unethical behavior while interacting with others who are part of their role-sets or belong to other intimate personal groups. When new salespeople are hired, experienced salespeople encourage the new hires to pad their expense accounts because some expenses cannot be charged to the company. Supervisors encouraged the workers not to complete the required paperwork on the repairs so they could meet the space shuttle program's tight production schedules. After the shuttle Columbia broke up on reentry, killing all seven astronauts, investigators found that a piece of foam falling off a fuel tank during liftoff had irreparably damaged the shuttle.