Exam 2: Chapters 6-11

Engagement Continuum: Not Engaged

-"Checked Out" -Sleepwalking -Put in time-but not energy or passion- into their work -May or may not "go the extra mile"

Diffused Responsibility

-"Don't worry - we're taking care of everything" ~Workers encouraged to turn over responsibility to those in higher levels -Diffusion of responsibility in groups ~Bystander research: if there are other people around, people are less likely to act, expect someone else to do it ~Groupthink ~"illusion of morality": ~Ensure that alternative views are aired -Divide responsibility ~Specialization ~"Fragmentation of conscience" ~Create psychological distance

Benefits of Engaged Employees

-50% more likely to have lower turnover and absenteeism -56% more likely to have higher customer loyalty -27% more likely to have higher profits and deliver $3,800 more in profits per employee -46% fewer accidents -generate $27,000 more in sales per employee -create $18,600 more in market value per employee.

What four consumer rights did JFK want to protect?

-Right to be heard -Right to safety -Right to choose -Right to be informed

Compliance vs. Value-Based Approaches: Values- Based Approach

-Rooted in culture & driven by values -Proactive and aspirational -Commitment from senior mgmt -Aligned with performance measures -Employees more likely to: ~seek advice inside ~be willing to report ~be committed ~support decisions -be aware of ethical & legal issues -Less likely to be unethical

Important Reminders

-Using the Reward System to Reinforce the Ethics Message ~Not just the results but how you got there -Evaluating the Ethics Program ~Whether employees "liked" the program isn't enough ~Surveys -Baseline data followed up by an additional survey after the ethics initiatives take place -Extent to which employees understand ethical expectations -Measure the extent to which employees observe unethical conduct -Attitudes towards ethics management programs ~Don't ask questions if you're not willing to accept and do something about the answer ~Evaluate on a regular bases (every 1-2 years)

What is employee engagement?

-Very simply, it's discretionary effort -Engagement spans a continuum from "engaged" to "actively disengaged" -There are clear links between employee engagement and their focus on customers and aspects of their organization's financial and operational performance across a number of areas -Employee engagement has real implications on employees' ethical behavior

Recognize the Power of Indirect Rewards and Punishments: Social Learning Theory

-Vicarious learning -Powerful message based on what managers reward/punish or fail to reward/punish -People learn from observing the rewards and punishments of others

Communicating Ethics: Multiple Communication Channels

-Websites—internal and potentially external -Recruiting brochures ~Mission statement, corporate values, how employees succeed/fail -Campus recruiting - Lockheed Martin discusses ethics with students -Orientation meetings/materials ~Common ethical dilemmas, how to handle them, helpful resources, report a concern ~Don't just read the code of conduct aloud (Yawn) -Newsletters and magazines ~Stories about heroes or periodic ethical dilemmas and how they were handled -Booklets ~Used to meet specific job needs and continuously updated

Reward Systems

-What gets rewarded, gets done! -People will go the extra mile to achieve goals set by management -Goals combined with rewards can encourage unethical behavior

Communicating Ethics: Evaluating the Current State of Ethics Communication

-What type of dilemmas are employees most likely to encounter? ~Unique to industry -Chemical company—environmental concerns and safety -Manufacturing—safety, product quality, liability, labor relations -What don't employees know? ~Mid-career versus college graduate hires -How are policies currently communicated? (40 lbs binder, online) ~No one will memorize a policy manual—you need a "snapshot" of key policies that employees can become familiar with ~Send a clear message that employees need to know when to ask questions- "if you don't know, ask!" ~Companies rarely communicate instances of employee failure or likelihood of getting fired- only fed stories of good employees and rewards -What communication channels exist? ~Example: Manage by walking around, the manager is approachable, specific reporting outlets ~Are new channels needed?

US Sentencing Commission Guidelines -1991

1. Companies must "self-report" wrong-doing to regulators 2. Companies must cooperate with any investigation 3. Companies must have an "effective" ethics program in place -Defined, well-communicated policy/code of ethics -Specific executive named to manage ethics and compliance -Care taken re: hiring and promotions ~who complies with the ethics policy -Ethics training and communications for all employees and agents -Compliance & whistle-blowing systems -Care taken re: future offenses that the company can be held liable for -Consistent discipline on ethics problems

Structuring Ethics Management

1. Corporate Ethics Office -"newest career in America" -part of the exec team or being groomed to be part of top management 2. Ethics Officers -Insiders vs. Outsiders ~outsiders are good as they bring a new perspective ~employees respond more favorably to someone already in the company, as insiders already know the company's culture -Ethics Officer Background: often have a background in law which means that they might not be as objective 3. Ethics Infrastructure -centralized vs decentralized ~There will be a different person for each division if the company is very specialized department-de-centralized ~still have one central office taking all ethics calls 4. Corporate Ethics Committee -for employees or managers to ask about ethics issues

Communicating Ethics: Basic Communication Principles: -Align the formal and informal communication systems

1. Formal—newspapers , magazines, memos, recruiting literature, policy manuals, annual reports, websites, advertising, formal oral communication (meetings and speeches) 2. Informal—a stream of information among employees about "what's really going on"- through the grapevine -Research demonstrates that 70-90% of the information is accurate 3. How can you compare the formal and informal communication systems? -Ask employees to see if they are aligned 4. If policies are only enforced for part of the population, or if there are different rules/treatment for different employees, credibility will be compromised -Need consistency between formal and informal

What is Cascading?

A term used to describe ethics initiatives that begin at the top of the organization and work their way down, level by level

Managing a Diverse Workforce A. Why are these ethical problems? B. Costs

A. -Concern fairness and respect for the individual -Majority of ethical issues are related to HR -Usually handled by local managers—must act quickly, fairly, and compassionately B. -Lawsuits - financial costs -Tarnished reputation -Less direct costs -Employee turnover, reduced productivity, mental and physical health

Is socially responsible business good business? -The Cost of Government Regulation A. The Benefits

A. ~Improved internal control systems ~Increased credibility of the markets ~Catch problems before they become serious ~Companies have streamlined processes to become more efficient ~Increased shareholder confidence in financial reporting

Why Corporate Social Responsibility? Strategic Porter and Kramer Example A. Value Chain B. Responsive CSR

A. Value chain - business activities of a firm that add value as a product or service passes from one part of the business to another -Where in the value chain does the organization create (potential) harm and how can it manage it -Toy company that pays attention to child safety -Also used to recognize opportunities for social good ~FedEx using its unique knowledge/expertise to respond to crises- delivered Pedialyte to children overseas after a large tsunami in 2004 B. Identify value chain opportunities, creating clear goals and evaluation criteria, implementing initiatives -Also helps the organization succeed in a competitive environment -CSR initiatives are sometimes costly but still carried out for ethical reasons -Consistent with values and the right thing to do -Properly disposing of toxic wastes in foreign countries -Not doing business in countries known for corruption -Can backfire if society believes the company only engages in CSR initiatives when it can profit from doing so

Is socially responsible business good business? -The Cost of Government Regulation B. Boards

B. -Taking oversight more seriously because of new regulations and potential for personal liability ~MCI (formerly WorldCom) -Board rejected a takeover to uphold the guideline to "maximize the long-term value of the company for its shareholders" -Public companies are responsible to which share holders? Long-term or short-term?

Stakeholders B. Primary Stakeholders C. Secondary stake holders D. Major stakeholder groups covered in chapter 10

B. The groups or individuals which whom the organization has a formal, contractual relationship -customers, employees, shareholders/owners, suppliers C. Individuals or groups to whom the organization has obligations, but who are not formal, contractual partners C. Consumers, Employees, Shareholders, Community

Greenwashing

Disingenuous attempts at public relations rather than a sincere effort to reduce environmental harm

Specialization

Each segment does their job without considering what the industry as a whole is doing -Example: the banks, insurance cos, etc in the financial crisis

Managing a Diverse Workforce: Harassment

Every member of the team has the right to feel comfortable on the team and to be treated with respect

Moral Licensing

Feel that it is okay/justified to be immoral at work if they do good things in their personal lives

Pygmalian Effect

People usually live up to the high expectations you have for them so if you have high expectations of standards and behavior, they will work to meet those expectations

Corporate Social Responsibility

Responsibility beyond economic and legal obligations - to act ethically and to contribute in a positive way to society

Fragmentation of Conscience

The idea that any group will remain inevitably potentially conscienceless and evil until such time as each and every individual holds himself or herself directly responsible for the behavior of the whole group

Reinforcement theory

You should reward behavior that you want and punish the behavior you do not want - you are more likely to act unethically if rewards are linked to meeting sales goals as opposed to selling with integrity

Illusion of Morality

think that what we are doing is ok/ethical

Conclusion of Ch. 6: Specifics of ethics systems will vary depending on the context/culture of the firm

-Regulated industries—legal compliance -Value-based culture—emphasis on ethical values/aspirations -Smaller firms—less likely to have separate formal ethics programs

Why Corporate Social Responsibility? Pragmatic

-To maintain legitimacy, protect reputation, viability -We must use power responsibly or risk losing it -Avoid being too reactive, playing catch-up to repair damage -Proactively analyzing stakeholder landscape and initiating constructive dialogue ~Dell including environmentalists to craft a recycling strategy

Is socially responsible business good business? -The benefit of a Good Reputation

-Pays off in terms of lower costs, higher sales, the ability to charge premium prices -Attracts investors -Workers are more attracted to socially responsible organizations ~In a Stanford University study, 94% of MBA graduates said they would forgo financial benefits to work for a company with a good reputation for ethics and social responsibility

Psychological Distance

-When potential victims are out of sight or distanced, it is more difficult to see oneself as responsible for any negative outcomes -Milgram shock experiment: teachers didn't feel as bad shocking the student if they told someone else to administer the shock -Don't feel as bad about making a decision that will cut jobs or locations in other states or countries

Types of Corporate Social Responsibility: Philanthropic

-Activities that promote human welfare or goodwill generally through donations of time and money or products and services -Failure to be philanthropic is not unethical -Some question whether it is a responsibility at all -Those with wealth are often expected to share their good fortune and are given tax incentives ~Andrew Carnegie ($7 billion) ~Bill and Melinda Gates (95% of their wealth) -Public disclosure is not required ~Could lead to cynicism as outsiders may think you are only philanthropic to get good publicity -Because of knowledge and wealth, obligations exist to give back -Examples: ~FedEx in response to the tsunami of 2004 in Southeast Asia ~Wal-Mart in response to Hurricane Katrina: gave food and clothes to victims and kept/gave jobs to employees who lost their homes, etc -Is the meaning of responsibility lost if social responsibility is just about making money? ~Publicizing efforts ~Is company just trying to polish its image? ~Are philanthropic efforts an external or internal matter?

Discipline: Practical Advice for Managers

-Adults differentiate between fair and unfair discipline -Punishment is expected if rules are broken -Discipline fairly and consistently—employees will become better corporate citizens -Be concerned about observers and implicit messages -Morally outraged when managers do not do their jobs -Integrity should override important other values, such as team loyalty -Do not punish employees for doing the right thing -Employees want to see that the manager did their job and that "justice prevailed ~saw the bad behavior, did the right thing, punished bad/unethical behavior

Why Corporate Social Responsibility? Ethical

-As a part of society, we have the responsibility to behave ethically and to contribute to the greater good -It is the right thing to do -Some say duty exists despite whether an economic payout is likely to result -Can be costly in the short-term, but likely to pay off in the long-term (e.g., Honda's commitment to fuel economy)

Why Corporate Social Responsibility? Strategic

-Being socially responsible creates shared value and can differentiate one from competitors -When society prospers, business prospers - they are partners -Porter & Kramer ~The dependence of business and society -Society provides workers and business transactions -Businesses innovate, create jobs, goods, and services, and pay taxes to support society -Search for opportunities that create shared values—good for business and society

Is socially responsible business good business? -Being socially responsible because it's the right thing to do

-Businesspeople are people first, who value their good reputations and the opinions of their friends, family, and community -Businesspeople are guided by a moral compass -It's not just about financial consequences, but about human consequences

Know Your Audience: Loose Canons

-Characteristics ~ Good compass ~Don't know the rules -Needs ~Training in ethical dilemmas ~Heightened supervision -Generally moral people- may be new to the company or not exposed to or familiar to business ethical standards

Know Your Audience: Good Soldier

-Characteristics ~Good compass ~Know rules -Needs ~Encouragement ~Reinforcement ~To know that efforts to be ethical is right and fit into the company -Knows what is right and wrong -Hast their own values

Know Your Audience: Grenades

-Characteristics ~No compass ~Personal Agenda ~May or may not know the rules -Needs ~Senior management as a strong example of what is right and ethical ~Swift discipline -Potential to be the most destructive to the company

Conclusion of Ch. 6: Key to Effectiveness

-Commitment from the top -Involvement of leaders/employees from all levels -Ethics is an ongoing effort to be continuously reinforced and integrated into the culture

Communicating Ethics: Policy Manuals

-Consulted on a need to know basis -Communicate relevant rules to those who need to know them -Prioritize—communicate the most important policies -Write policies in plain, easy to understand language -Provide examples to convey the meaning of the policy -Think of creative ways to convey important policies

Punishment

-Critical part of a manager's job -Must be administered fairly ~Fits the crime ~Consistent with what others have received ~Employee has input ~Conducted in private ~Explanation that ties punishment to misconduct ~Employees should feel that the outcome is fair, that they "had it coming" for their actions -Recognize punishment's indirect effects ~Other workers are affected too—remember vicarious learning ~Given that punishment should be private, use the grapevine to convey that justice has prevailed ~Employees want to believe that good guys are rewarded and bad guys are punished

Due Care Theory: Involves what elements?

-Design: meet regulations and specifications, be safe under foreseeable conditions, including customer misuse -Materials: meet govt regulations and be durable to withstand reasonable use -Production: made without defects -Quality control: inspected regularly for quality -Packaging, labeling, and warnings: safely packaged, clear and easy to understand directions, describe hazards -Notification: a system in place to recall products that are dangerous

Communicating Ethics: Formal Reporting Systems -Making Sense of the Numbers

-Does more calls mean more ethical problems? ~Probably not ~Most likely indicates that the reporting system is working, at least at first ~Eventually, ethical conduct should become so routine that calls decrease -A quiet telephone: What does it mean? ~Lack of concern or recognition of ethical problems (negative) ~An intimidating environment where people fear retribution (negative) for calling in ~Good problem solving at the local level (positive) ~No one knowing the ethics office exists (negative) -Preferably, the calls would include a relatively low and stable level of allegations of misconduct and a higher level of advisory questions- "how should I handle this ethical dilemma?"

Triple Bottom Line

-Economic, Social, Environmental - Organizations owe something to society ~employees, customers, and other stakeholders ~society ~environment-sustainability -Umbrella term: harmony between the three factors of the triple bottom line

Role Modeling Example: Employee comes to you with an issue, you reassure her that everything is fine, she comes back unsatisfied. You agree to resolve the issue with her. -Your approach communicates...

-You're glad she brought up the issue -You take her point of view seriously, even if you don't agree -You trust her instincts and she should too -Upholding ethics is so important that you will pursue the issue with her even if you don't entirely agree -May find that the employee is correct

Communicating Ethics: Formal Reporting Systems

-Employees should feel free to... ~Speak openly about ethical issues ~Question authority figures ~Report concerns -Managers should be approachable and willing to listen (informal system) -Employee should not fear embarrassment or retaliation -If possible, it's best to have the ethics office staff speak to callers (through a formal system, such as a hotline) ~Otherwise, the caller's emotions and the content of his/her message may be lost -The identity of the caller and alleged violator must be protected -Calling system should be available around the clock, especially for international organizations

US Sentencing Quidelines

-Established in 1991 for companies being sentenced or reaching settlements -Apply to all companies -Can be triggered by the activities of just one employee and can affect the company and the manager -Give judges latitude to impose additional fines -Death Penalty is also an option: the government forces company to divest all assets and be liquidated (this happened to Arthur Anderson) -Do not apply to Equal Employment Opportunity Commission (EEOC) violations or other HR related issues -Such as discrimination, sexual harassment, etc. -EEOC has its own penalties

Managing the Basics: Hiring and work assignments

-Everyone has biases (e.g., don't like people with accents or from certain parts of the country) -But...talent and ability come in a variety of packages ~Golden Rule ~Veil of ignorance: don't know anything about the person you are hiring to make a judgement first -Hire by deeply understanding the corporation's culture and finding people who fit in -Beware of the "corporate profile" ~Could risk being accused of discrimination ~Abercrombie & Fitch -New hires should still have enough differences to encourage innovation

Managing the Basics: Performance Evaluation

-Formal feedback -Informal, continuous feedback ~To reward excellence and steer employees in the right direction -It's difficult ~Managers hate giving negative feedback ~5 out of 7 managers said they'd prefer to lie about performance than give negative feedback ~Employees will accept if given in a clear, honest, sensitive manner and if expectations were clear in the first place ~Provide specifics of problem, goals for improvement, timeline, and follow-up -Align objectives of the overall organization, the department, and employees -Continuously track employee progress and keep them informed

Managing a Diverse Workforce: Diversity

-Future success will depend on managing diverse groups -Create an environment that maximizes the contribution of each individual -With the U.S. population being diverse, organizations need a workforce to meet these diverse needs -Dress codes ~Usual aim is to eliminate dress that is too immodest or too casual to the customer ~If formal dress is required in some situations, explain the reason to employees

Types of Corporate Social Responsibility: Ethical

-General responsibility to avoid harm and do what's right -Places expectations on businesspersons to function at a level above the law -Tobacco companies marketing to minors in Asia despite health risks -Building products company insisting on having asbestos warning label, despite losing business in Japan

Is socially responsible business good business? -The Cost of Government Regulation

-Government is responsible for risks to our system and for holding companies accountable for the "externalities" they create. -Externalities are costs to society, such as environmental damage, that are produced by companies, but not reflected in the company's cost structure. -Industries that became de-regulated have been on the forefront of recent business scandals (e.g., energy, telecommunications, financial services) ~Society lost trust and demanded more regulation -Regulation, such as Sarbanes-Oxley (SOX), has placed focus on conducting audits and away from innovation and day-to-day business (a cost to business) -Boards -Some industries have attempted to self-regulate, perhaps to minimize government regulation ~Pharmaceutical Research and Manufacturers of America ~Voluntary guidelines on how pharmaceutical representatives can market to physicians

Recognize the Power of Indirect Rewards and Punishments: Rewarding ethical behavior

-Idea that rewards are better than punishment ~Reward those for honest expense reports? ~Reward those who do not engage in sexual harassment? -Seems ridiculous—rewarding what they should be doing ~Difficult in the short term ~Easier over the long term -Promote those with integrity; incorporate it into appraisal systems

Ethics and Consumers: Conflicts of Interest

-If an organization's customers or other stakeholders think that the organization's judgment is biased because of a relationship it has with another company or firm, a conflict could exist. -Enron ~Created off-the-book partnerships to hide debt and inflate stock prices ~Arthur Andersen—served as Enron's accountant and consultant -Investment Banks ~Face huge potential conflicts of interest every day -Raise money for firms and keep stock prices high -Also serve investors who want to buy at low prices -Financial Crisis of 2008 ~Investment banks sold mortgage-backed securities but at the same time bet against their products by buying insurance ~Investment banks encouraged rating agencies to give the products high marks

Cost of Disengaged Employees

-In the United States: ~16% actively disengaged = 22.5 million workers ~Each employee costs their employer about $13,000 per year in lost productivity ~Total lost productivity per year in U.S. = almost $300 billion

Is socially responsible business good business? -Socially Responsible investors reward social responsibility

-Investors who clearly care about the financial and social bottom line of a business -Insist that investments meet ethical as well as financial criteria, putting their cash where their conscience is -Social responsible stock indexes -Grew from $40 billion (1984) to $3 trillion (2007) -Socially responsible mutual funds that provide above average returns

People Follow Group Norms

-Rationalizing unethical behavior -Pressure to go along ~"everybody is doing it", employees don't want to look like the goody goody or be ostracized by the group or not linked -Practical advice for managers ~Be aware of group norms ~Identify informal group leader and attempt to influence his/her behavior (remember role modeling) ~Consider whether the reward system implicitly rewards misconduct -Slade Company example ~a group member would clock out for the entire group when they left last ~They were all productive and hard working employees ~Company moved to set 5 day pay as opposed to hourly wages so that they weren't motivated to cheat the timesheet

Diffused Responsibility: Practical Advice for Managers

-Make personal responsibility a relevant issue and reinforce ~Spell out responsibilities of each position ~Keep concerned employees informed—don't completely remove their responsibility -Tell employees that every member will be held responsible for group decisions -Appoint devil's advocate or multiple advocates in groups -Design of organization—encourage sharing across divisions (to see the big picture) ~Trend for decentralization may help -Visit distant work sites and customers (reduce psychological distance)

Communicating Ethics: Ethical Training Programs

-Make the training different and memorable—so that employees look forward to it -Use scenarios—not all scenarios have clear-cut answers, but they produce dialogue/thinking -Cascading—start with top managers who then train the next level, etc. -Use local managers as trainers and everyday issues—reassures employees that they're not the only ones regularly exposed to ethical issues -Create ethics dialogue by asking employees to discuss, positive, memorable ethical experiences—a focus on the positive is energizing -Ethics games—perhaps get senior managers involved as an appeals board ~May raise more questions than answers, so debrief with advice and resources

What are the underlying assumptions of managing business in ethics?

-Managers want to be ethical -Managers want their subordinates to be ethical -Based on their experience, managers will have insight into the unique ethical requirements of the job

Discipline Steps

-Meet with the employee, focus on behaviors -Meet privately and on neutral terms ~in the conference room not your office -Provide employees the opportunity for "voice" -Appropriately harsh and consistent with other violations/violators ~punishment should match the crime

Group think

-Members of the group tend to conform to the decision they think most of the group members prefer, or may find it difficult to express disagreement and tend to censor themselves even if they disagree with the group decision -Challenger disaster is an example of this

Communicating Ethics: Mission or Value Statements

-Mission - "here's what we do" -Values - "here's how we do it" ~Short, memorable, and in plain English ~Fit culture and include employee input (not created from outside) ~Must be applied

Sustainability

-More attention is being paid to environmental sustainability ~Many executives agree with the scientific consensus—human activity is a key driver of climate change ~Threat to water supply, crop yields, sea levels ~Stakeholder expectations that companies will use resources responsibly, recycle and reuse when possible, eliminate harmful toxins, and reduce greenhouse gas emissions ~Some global markets (e.g., European Union) are increasing government regulations of carbon emissions ~Opportunity to innovate, creating business and future jobs ~Some organizations make sustainability the cornerstone of their broader strategy in an effort to gain competitive advantage -Some executives actually support increased government regulations, seeing it as a way of reducing uncertainty and ensuring fairness

Communicating Ethics: Codes of Conduct

-Most ethics programs, good or bad, have them -Focus on the values that guide decision making, then become more specific with cases, policies, etc. -Code content will vary depending on industry and globalization (e.g., bribery in global markets) -Update code regularly (perhaps circulate every 1-2 years) -Some companies have employees sign a statement saying that they read and have complied with the codes

Communicating Ethics: Communicating Senior Management Commitment to Ethics

-Must believe in and actively support ethics initiatives -Many employees distrust top managers -Employees would like more communication from the top

Engagement Continuum: Disengaged

-Negative drag on the culture -"It's not my job" -May well sabotage company initiatives and employee goodwill -No company loyalty -Undermine what engaged coworkers accomplish

Managing the Basics: Discipline

-Often postponed for too long with the hope that the situation will improve -People in different positions or "stars" should not be treated differently -Sentencing Guidelines (Chapter 6) ~All employees must receive consistent discipline for similar infractions

De-individuation - People Fulfill Assigned Roles

-Old TV series example ~2 officers see another officer buying cocaine for his mother with cancer ~decide to choose team loyalty over duty to the law and didn't turn him in Research: Zimbardo Prison experiment ~the prisoners and the guards fully took on their roles ~the guards became more aggressive ~the prisoners felt meek and unsafe -Roles at work ~Conflicting roles can lead to unethical behavior ~Roles can support ethical behavior -Practical advice for managers ~Roles influence behavior ~Analyze roles and role conflicts ~Determine whether jobs need to be altered

Managing the Basics: Performance Evaluation Turkey Farming

-Pass a poor performer from one to dept to the next because managers are afraid to give them a bad eval and then they move to a different dept -High performing coworkers will see the "turkey's" performance evaluations as unfair -Sends the message that "just okay" is acceptable

Engagement Continuum: Actively Engaged

-Passionate and enthusiastic -Feel profoundly connected to the company -Drive innovation -Move the company forward -Eagerly "go the extra mile"

People Do What They're Told

-Research: the "shocking" Milgram experiment ~"Teacher" told to give the "student" shocks for incorrect answers ~The teachers feel bad or that its wrong but continues because that's what they were told to do ~2/3 of participants were willing to give the most fatal shock because they were told to -McDonald's case was a real life example of someone doing something wrong and unethical because they were told to do so by what appeared to be an authority figure -Obedience to authority at work -Practical advice for managers ~Stop and think hard when an authority figure asks you to do something that could harm another or seems wrong in another way—think for yourself ~Recognize the power managers hold as legitimate authority figures ~Use this power to set high ethical standards ~Encourage employees to question manager if they think something is wrong

Types of Corporate Social Responsibility: Legal

-Responsible for carrying out work in accordance with current law and government regulations -The minimum norms and standards of business conduct -But not all societal expectations are codified into law -Laws vary from state to state and from country to country

Compliance vs. Value-Based Approaches: Compliance-Based Approach

-Rooted in law & regulations -Reactive -Limited senior mgmt involvement -Potential for "...anything goes as long as there isn't a rule against it." -Employees more likely to: ~think company is protecting itself ~seek advice outside ~be cynical ~distrust ~CYA (cover your behind) -Less likely to: ~report bad news ~be committed

Critical Role of Managers in Increasing Employee Engagement

-Senior Management ~Is sincerely interested in employee well-being ~Communicates openly and honestly ~Is visible and accessible ~Effectively communicates the reasons for key business decisions ~Actions are consistent with stated values -When senior managers model these behaviors, they "trickle down" to lower levels of the organization

Is socially responsible business good business? -The Cost of Illegal Conduct

-Senior executives -Sentenced to prison and financial restitution -Far from "Club Fed" ~Serve time with rapists, pedophiles, drug dealers ~No privacy, subject to body cavity strip searches, prison food -Shame brought to self and families -Often lose their families -Firm losses -Drop in stock prices -Financial penalties -Lost reputation with associated market value losses -Lose legitimacy with business partners -More profitable, reputable firms distance themselves

Ethics and Consumers: Product Safety: Johnson and Johnson

-Seven people died after taking Tylenol that was laced with cyanide -Tylenol acted swiftly and recalled 31 million bottles with a retail value of $100 million -Follow-up survey—87% said that they knew Tylenol wasn't to blame, but 60% still said they wouldn't buy the product -Tylenol redesigned package and offered coupons to increase sales -By the mid-1980s, Tylenol regained much of its market share -The CEO, James Burke, knew the value of open/honest communication—something many CEOs shy away from -The recall was costly, but rebuilt loyalty in the long term -But... ~In 2000 sold defective glucose-monitoring machines ~More recently, Tylenol was accused of paying kickbacks to nursing homes to use its drugs

Managing the Basics: Layoffs:

-Survivors: ~have low morale, are less productive, distrust management, become extremely cautious -Assure that layoffs were for legitimate business reasons, those terminated received ample time and were treated with dignity and respect 1. Do your homework 2. Outplacement counselor available 3. Terminate on neutral grounds 4.Deliver news in person, be as objective as possible, and never get personal 5.Keep the information private, unless in a layoff situation, but even then, do not discuss the details of why certain people were chosen

Communicating Ethics: Novel Approach to Ethics Communication

-Texas Instrument ~Instant experiences - learn from other people's mistakes ~An email communication system about ethical dilemmas -Fit with TI's electronic culture -Allowed for interaction and reflection -People are less inhibited when communicating electronically

Is socially responsible business good business? -What the research says about social responsibility and firm performance

-The average financial performance of the 100 best corporate citizens in the S&P 500 was higher than the rest of the S&P 500 -A recent meta-analysis provides evidence for a positive relationship between CSR and financial performance -A "virtuous cycle" likely exists ~CSR leads to higher financial performance ~Higher financial performance provides slack resources for CSR -Excessive philanthropy (inverted U-shaped relationship) ~Beyond some optimal point, philanthropy becomes counterproductive -Meta-analytic evidence suggests that stock prices dove after firms behaved socially irresponsibly or engaged in illegal acts

The Manager as a Lens

-The buck stops with managers -Begin with clear standards -Design a plan to continually communicate your standards -Managers are role models ~It's not a choice, it comes with the role ~Inspires, defines gray areas, respects concerns ~What you do is more important than what you say

Types of Corporate Social Responsibility: Economic

-The primary function of producing goods and services that consumers need and want while making an acceptable profit. -Bedrock/foundation of CSR -Without financial viability, the other responsibilities do not matter -Milton Friedman ~Management's sole responsibility is to maximize profits ~Yet, Friedman also said management should "make as much money as possible while conforming to the basic rules of society, both those embodied in the law and those embodied in ethical custom."

Reward Systems: practical advice

-Think about what kind of behavior and attitudes are being rewarded explicitly and implicitly -Think about goals, likely behavior, unintended consequences

Advice regarding ethical behavior

-Think of ethics in behavioral terms - what behavior are you looking for? -Specify the behavior you want and explain why ~role model the conduct/behavior you want to see in your employees -Create a work environment that supports that behavior

Consumer Rights A. McPherson v General Motors B. Pure Food and Drug Act

-To be safe -To be heard -To choose -To be informed A. First real consumer law -customer given the right to sue auto manufacturer for defective vehicle B. Passed in 1906 to prohibit adulteration in food and drugs -Created Food and Drug Administration

Walk the Talk

1. Talk about the ethical implications of decisions 2. Make it clear you don't want to be protected from bad news 3. Provide ethical guidance; participate in training 4. Weave ethical goals into performance management 5. Reward ethical conduct; discipline unethical conduct 6. Demand responsibility for actions 7. Encourage employees to challenge unjust authority 8. "Rules" for working for me—support ethical conduct? (informal) 9. How would people describe me?

Drivers of Engagement: Line of Sight A. Explanation B. Ethical Implications

A. Employees understand the company's strategic direction, how the company makes money and how their individual efforts play a role in that revenue-generating enterprise B. Employees evaluate organizational credibility by how well stated values reflect "how business is really done" and what values are getting rewarded. "Is my company credible?" "Can I trust it?"

Managing the Basics: A. Why are these ethical problems? B. Costs

A. -Involve honesty, fairness, and dignity of the individual -Desire for justice is a fundamental human characteristic -Most calls to ethics hotlines involve these very issues B. -Liability insurance—in response to increased litigation -EEOC (2009) - more than 93,000 discrimination complaints ~Monetary relief = $376 million -Employee morale goes down -Organizational reputation could be tarnished

Stakeholders A. What is a stake?

A. An interest or share in some effort or undertaking -A claim or a right to something B. The groups or individuals which whom the organization has a formal, contractual relationship -customers, employees, shareholders/owners, suppliers groups Secondary stakeholder groups Major stakeholder groups covered in this chapter Consumers Employees Shareholders Community

Is socially responsible business good business? A. Note to Investors B. Concluding Point

A. Before investing in a company, look for a pattern of previous litigation and regulatory problems B. Over the long term, companies must have both excellent business strategies and socially responsible business practices

Drivers of Engagement: Rewards and Recognition A. Explanation B. Ethical Implications

A. Business goals and values are clearly spelled out and employees know what they need to do and how they need to behave to get rewarded B. It is critical that companies pay close attention to the incentives that goals and values will provide for ethical or unethical behavior

Drivers of Engagement: Involvement A. Explanation B. Ethical Implications

A. Employees are involved in the enterprise, they actively participate, and their ideas are heard B. This kind of employee involvement encourages the two-way communications that is critical for ethical issues to be identified and resolved

Managing a Diverse Workforce: Family and Personal Issues A. Flexible Work schedule B. Personal Illnesses C. Substance Abuse

A. Make life easier for the employee and fair to the entire group B. If suspect undiagnosed illness, encourage to see doctor -Usually don't pose a problem to productivity -Ensure privacy/confidentiality C. -If suspect, record changes in behavior -Even if off premises, may have residual effects -Contact human resources ~Large organizations offer substance abuse programs

Managing Up and Across A. New team structures mandate that workers treat everyone well B. Honesty is Rule One C. Standards Go Both Ways

A. Multi-rater (360 degree) feedback -You never know who you'll report to or who will be crucial to your success in the future ~Cultivate relationships with managers and peers B. Lying or exaggerating can undermine your reputation -If you have a problem, identify the problem and offer a solution (avoid lying) C. Equally important for employees to set ethical expectations with their bosses—avoid slippery slopes -Refuse to compromise your standards

Drivers of Engagement: Informational Sharing A. Explanation B. Ethical Implications

A. People get the information they need to be effective when they need it, and information goes to all directions-up, down, and across the organization as needed B. Cultures where information sharing is encouraged are more likely to be open organizations where issues can be identified and resolved and not swept under the rug

Managing the Basics: Termination A. Cause B. Poor Performance

A. Theft, assault, cheating on expense reports, forgery, fraud, lying about a business matter -Word will spread through the grapevine that the person was let go as a reprimand—the specific details should be left out B. Formal system—verbal warning followed by written warning and then termination

Multiple Ethical Selves: A. Ken Lay B. Dennis Levine C: Practical Advice

A: CEO of Enron- philanthropic in his personal life and seen as a man of integrity. But in business, he created a cutthroat environment and encouraged employees to buy company stock even though he was selling off his shares B: Considered a family man at home but was involved in insider trading -Shows that your business behavior/work self can be influenced by your work environment C: -Analyze yourself -Observe your subordinates -Identify what influences them