Business Ethics Chapter 5

Principles

- Widely accepted - Used to develop values and standards - Establishes pervasive - Value across cultures

4 Steps to Acting Ethically

1. moral awareness 2. moral decision making 3. moral intent 4. moral action

Compliance or Moral Values

Laws and Regulations

Internal control

They control the events in their lives by their own effort and skill

Significant others

Those who have influence in a work group, including peers, managers, coworkers, and subordinates

Difference Principle (Rawls)

(economic and social equalities) [or inequalities] should be arranged to provide the most benefit to the least-advantaged members of society

Liberty Principle (Rawls)

(equality principle) Each person has basic rights that are compatible to the basic liberties compatible of others

Crude Oil/Jim's Management Style

- Jim should be fired or go through management trainings - It's an unethical/legal issue because it's defamation of character and it should promote a healthy/encouraging environment.

Values

- Subjective and related to choice - Used to develop norms - Provides guidance to organizations - Differs across cultures

Industry competition determined by:

1. Barriers to entry into the industry 2. Available substitutes for the products produced by the industry rivals 3. The power of the industry rivals over their customers 4. The power of the industry rivals' suppliers over other rivals

How to make an ethical decision

1. Recognize an ethical issue 2. Get the facts 3. Evaluate alternative actions 4. Make a decision and test it 5. Act and reflect on the outcome

Wells Fargo Case

A major problem was Wells Fargo's corporate culture. • The 150-year-old firm had a controversial sales program in which employees must meet aggressive sales goals or risk being fired. The program highly encouraged cross-selling or selling additional products to consumers. Because of the firm's unrealistic sales goals and a lack of controls to ensure employees were really engaging in selling, the chances for fraud were high. • Many employees adopted the teleological perspective that the ends (keeping their jobs and receiving greater incentives) justified the means (obtaining these sales goals even if it meant falsifying customer accounts).

How do political institutions influence the development of values?

As a result, organizations must comply with these types of institutional norms and belief systems to succeed.

John Rawls

Believed justice principles were beliefs that everyone could accept

Frame for Understanding Ethical Decision Making in Business

Ethical Issue Intensity, Individual Factors, Organizational Factors, and Opportunity Then --> Business Ethics Evaluations and Intentions Then --> Ethical or Unethical Behavior

Important Normative Structure Concepts

Fairness and Justice

Internal Rewards

Feelings of goodness and personal worth generated by performing altruistic or ethical acts

External control

Going with the flow. Life events are due to uncontrollable forces

Institutions as the Foundation for Normative Values

Government, religion, and education influence creation of values, norms, and conventions.

Normative Consideration in Ethical Decision Making

How organizational decision makers should approach an issue Different from a descriptive approach that examines how organizational decision makers approach ethical decision making. A normative approach in business ethics revolves around the standards of behavior within the firm as well as within the industry.

Locus of control

How people view themselves in relation to power

Nationality

Impossible to state that ethical decision making in an organizational context will differ significantly among individuals of different nationalities

Gender

In many aspects there are no differences between men and women with regard to ethical decision making

Moral Intensity

Individuals' perceptions of social pressure and the harm they believe their decisions will have on others

Kitty Genovese

Murdered outside apartment, nobody helped her- prompted to investigate bystander effect due to diffusion of responsibility

Age

Older employees with more experience have greater knowledge to deal with complex industry-specific ethical issues. Younger managers are far more influenced by organizational culture.

Institution Categories

Political, Economic, and Social

Organization's values

The alignment between a person's own values and the values of the organization help to create positive work attitudes and organizational outcomes

Steven's Dilemma

The ethical issue in this case has to do with how Steven can confront the unethical behavior occurring within the restaurant. Steven should become a whistle-blower or let higher-ups know about the situation. The employees should not stoop so low for incentives.

Ethical issue intensity

The relevance or importance of an event or decision in the eyes of the individual, work group, and/or organization [Personal and temporal in character to accommodate values, beliefs, needs, perceptions, the special characteristics of the situation, and the personal pressures prevailing at a particular place and time]

Education

Those more familiarized with the ethical decision-making process due to education or experience are likely to spend more time examining and selecting different alternatives to an ethics issue

External Rewards

What an individual expects to receive from others in the social environment in terms of overt social approval, status, and esteem.

Individual immediate job context

Where an individual works, whom they work with, and the nature of the work.

Who has the most responsibility in this scandal?

While the employees might have engaged directly in the misconduct, top managers were the decision makers. Investigations suggest that top managers knew about the misconduct and did nothing to stop it. At the very least, the sales goals and incentive systems they set created a toxic corporate culture where employees felt pressured to engage in fraudulent conduct.

Ethical culture

a function of many factors, including corporate policies on ethics, top management's leadership on ethical issues, the influence of coworkers, and the opportunity for unethical behavior

Isomorphic

a phenomenon that drives organizations. to resemble one another such as legal or political regulatory pressures, imitating behaviors resulting from.

Corporate culture

defined as a set of values, norms, and artifacts, including ways of solving problems that members (employees) of an organization share.

Opportunity

describes the conditions in an organization that limit or permit ethical or unethical behavior

Individual Factors

gender, education, nationality, age, locus of control (external/internal control)

Obedience to Authority (Milgram)

helps to explain why many employees resolve business ethics issues by simply following the directives of a superior [Causes employees to be under pressure from bosses' desires]

While industry shared values promote organizational effectiveness when linked to goals, it can what?

hinder effectiveness if more efficient means of organization and structure are avoided in exchange for stability.

Veil of Ignorance (Rawls)

no original position and you make a decision based on that

What are social institutions?

religion, education, and individuals (such as the family unit)

Ethical Awareness

the ability to perceive whether a situation or decision has an ethical dimension

Normative Considerations in Ethical Decision Making

• Normative rules and standards are based on individual moral values as well as the collective values of the organization. • The normative approach for business ethics is concerned with general ethical values implemented into business. • Concepts like fairness and justice are highly important in a normative structure. • Strong normative structures in organizations are positively related to ethical decision making.

Companies convert basic principles into core values

• Provide the abstract ideals that are distinct from individual values and daily operational procedures. • Include operating in a sustainable manner, collaboration and teamwork, and avoiding bribery. • Provide a blueprint into the firm's goals and how it views ethical decision making.

Ethical Decision-Making Model to improve Ethical Decisions

• does not help in determining if a business decision is right or wrong • Provides insights about ethical decision making in businesses • Business ethics involves value judgments and collective agreement about acceptable patterns of behavior. • Gaining an understanding of the factors that make up ethical decisions helps in differentiating between an ethical issue and a dilemma • Ethical decision making within an organization does not rely strictly on the personal values and morals of individuals • Knowledge of moral philosophies or values must be balanced with business knowledge and understanding of the complexities of the dilemma requiring a decisio • Organizations take on a culture of their own, which, when combined with corporate governance mechanisms, have a significant influence on business ethics