MSB 390 Final

Integrity according to Spencer W. Kimball

"A state or quality of being complete, undivided, or unbroken"

What connects self-management & ethics

"Whatever weakens your reason, impairs the tenderness of your conscience, obscures your sense of God, takes off your relish for spiritual things, whatever increases the authority of the body over the mind, that thing is sin to you, however innocent it may seem in itself."

Seek Feedback

- 360 Feedback - The group chart of self-disclosure

Social Contract

- A branch of utilitarianism - Social contracts sacrifice independence to reduce the negative impacts of nature. - Thomas Hobbes

Why do we study ethics?

- ARTICULATING ethical problems is hard - JUSTIFYING ethical positions is hard - MODELING ethical behavior is hard

Mindlessness

- Automatic/Habitual - Single-minded - Task-minded

Modeling Ethical Behavior - Common Cognitive Biases

- Availability Heuristic - Fairness Bias - Framing and Anchoring - Milgram Syndrome - Role Binding - Moral Accounting - Locus of Control - Overconfidence - Endowment Effect

Milgram Syndrome

- Based in the shock experiments done by Stanley Milgram - Politeness/civility - Promise to cooperate - Awkwardness of withdrawal - Absorption in technical aspects - Focus on task completion - Impersonal authority ("they")

How does ethical behavior restore value?

- Better Information - Fair Competition - Protecting the rights of others

Asch Syndrome

- Characterized by an urge for social belonging. - Size and familiarity of groups makes a difference. - The issue at hand makes a difference.

Virtue Ethics

- Comes from Aristotle - An action is ethical when it passes the: Mirror or Pillow Test Sunshine or Disclosure Test

Moral Courage

- Commitment to Moral Principles - Willingness to Endure - Awareness of Danger

Based on the Prisoner's Dilemma, what does unethical behavior do?

- Damages Trust - Encourages Retaliation - Destroys Value

Mindfulness

- Deliberate - Searching - Result-forcused

Three problems with Friedman

- Different shareholders want/need different things at different times. - Executive shareholders assume they are the same as all shareholders. - Companies can ignore externalities

Methods of Dissent

- Direct - Indirect - Appeals for more information - Invoke organizational values - Suggest another alternative

Protecting the Rights of Others

- Draws upon talents of wider set of individuals - Develops long-term respect from the community - Maintains the environment for long-term value to all

Exchange

- Ethical behavior is a fair deal - Requires a due compensation.

Social Accord

- Ethical behavior is citizenship - The laws of the land are the most important guide.

Conformity

- Ethical behavior is conformity - Peer pressure is the measure of ethical behavior.

Universal Principles Stage

- Ethical behavior is independent - Not just independent, but also right.

Punishment

- Ethical behavior is obedient behavior - Fear of being punished, such as a child fearing a parent

Social Contract Stage

- Ethical behavior is social responsibility - Justice, fairness, right.

The psychology of ethics

- Even if ethical truths are firm, our understanding of them is changeable. - Our understanding of ethics changes with mood, context, capacity, and other influences. - The changes in our understanding can often be predicted, based on observed patterns.

Two factors when commodifying something

- Fairness or Equality - Corruption

Christian Virtues

- Faith - Hope - Charity

Social Goods

- Farming - Industry - Housing - Technology

Primary Stakeholders

- Formal or Contractual Relationship - Bounded Powers or Controls - Enforceable Duties

Prioritized Social Issues

- Generic Social Issues - Value Chain Social Impacts - Social Dimensions of Competitive Context

Strategies for Self-Management

- Habits - Refill the Well - Breakdown of Will

6 Psychological Moral Foundations

- Harm - Proportionality - Liberty - Ingroup - Respect - Purity

Counterpoints to Intuition

- Having a "good feeling" is not a reliable measure of ethical behavior - Just "weighing the consequences" is an unreliable measure of ethical behavior even for smart business people. - A good reputation is an unreliable measure of ethical behavior, even for trusted professionals.

Universal Values

- Honesty - Responsibility - Respect - Fairness - Compassion

HALT

- Hungary - Angry - Lazy - Tired

Visceral Forces

- Hunger - Fatigue - Fear

Indirect Dissent

- I feel a little uncomfortable about this - I'm wondering whether there's a better approach.

Pros of Stakeholder Theory

- Induces managers to consider externalities - Encourages managers to consider long-term outcomes. - Promotes socially responsible business

Secondary Stakeholders

- Informal or Implicit Relationship - Unbounded Powers or Controls

What are the proposed reasons why people behave ethically?

- Intuition - Human Nature - Self-Interest

BYU Employer Survey - BYU Weaknesses

- Lack of tolerance for diversity - Lack of social interaction - Will not make short-term sacrifices - Sense of arrogance/entitlement - Unwillingness to relocate/travel - Insensivity, sexist attitudes - Overemphasizing LDS experiences

Sources of Moral Obligation

- Law-based Moral Obligation - Agreement-based Moral Obligation - Moral Principle-based Obligation

Heinz Dilemma

- Lawrence Kohlberg - A woman is dying and needs an expensive medication. Husband cannot afford the medication, should he steal it or should she die?

Employee Engagement

- Line of Sight - Involvement - Information Sharing - Rewards and Recognition

Fair Competition

- Lowers cost of business in economy - Leads to better decision-making (do what's best for firm, not one individual) - Improves competitive nature of a country's economy - Creates a more vibrant, entrepreneurial economy - Attracts and retains better employees - Reduces costs of turnover

Enron

- Most classic contemporary example of the absence of ethical leadership. - Catalyzed Sarbanes-Oxley

Implied Warranties

- Of Fitness - Of Merchantability

Cons of Stakeholder Theory

- Paralyzes managers with too many obligations. - Discourages quick decision-making, even when necessary - Pressures companies into wasteful charitable platitudes.

A better approach

- Prioritizing Social Issues - A Strategic Approach

Cardinal Virtues

- Prudence - Temperance - Courage - Justice

A Corporation spends shareholder money when it:

- Reduces prices to slow inflation - Upgrades equipment to reduce pollution - Hires "hardcore" unemployed

A strategic approach to CSR

- Responsive CSR - Strategic CSR

The Stanford Prison Experiment

- Roles define expectations. - Roles lead one to act contrary to otherwise consistent personality

Strategies for improving self-awareness

- Seek Feedback!!!

BYU Employer Survey - BYU Strengths

- Strong moral values - Language Skills - Maturity - Knowledge/skill in area of study - Work ethic - Leadership skills - Presentation Skills - Commitment to service - Teamwork

The Economic Benefits of Ethical Behavior

- The Prisoner's Dilemma Game - Not all transactions are ZERO SUM. - Not all transactions are PERFECT KNOWLEDGE. - Not all transactions are done in a VACUUM.

Aristotle's theory behind virtue ethics

- The good person is living the good life - Good character is necessary for living the good life - Ethics is BEING an ethical person, not just doing ethical things.

Three common historical approaches of Ethical Leadership

- The leader maximizing the welfare of followers as defined by Utilitarianism Theory - The leader protecting the freedom of individuals, which is noted in Libertarianism Theory - The leader is focused solely on promoting the right thing to do, regardless of consequence, as seen in Kant's Ethical Theory

Better Information

- Trust from investors - Lower costs for audits, controls, investigations - Better allocation of resources - Customers will be more loyal - Lower costs from suppliers - Attracting and retaining better employees

Refill the Well

- Visceral Forces - HALT

Customers

- Warranties - Negligence - Implied Liability

Ethics as Human Nature

- We have a neurological preference against unfairness and deception. - Evolutionary biology describes concern for others as a survival trait. - The mere existence of human concepts of ethics demonstrates that it comes naturally to us.

Frameworks and the brain comes down to

- emotion vs reason - Reasoning usually kicks in after choices have been made, diminishing opportunities to make better choices.

Attributes of Morally Courageous Leaders

- greater confidence in principles than in personalities - high tolerance for ambiguity, exposure, and personal loss - acceptance of deferred gratification and simple rewards - independence of thought - formidable persistence and determination

The Asch Experiments showed

- it appears to be more difficult to resist the majority if isolated. - that one voice can make a difference among many.

Stakeholder Salience

- power - legitimacy - urgency

Examples of Social Contracts

- standing in line - public education - cross walks

Miss Evers' Boys

- tells story of nurse who was hired to recruit and retain young African-American men into the Tuskegee experiment designed to describe the long term effects of untreated syphilis. - pushed up a hill

The three facets of Humility

1. A willingness to view oneself accurately 2. Appreciation of others strengths and contributions 3. Teachability

The long invoice of unethical behavior

1. Asset shrinkage 2. Security costs 3. Consumer distrust 4. Employee distrust 5. Reputation loss 6. Legal costs 7. More expensive debt 8. Investor distrust 9. Regulatory intrusion 10.Bankruptcy externalities

Beware of the Pitfalls of Politics

1. Charging the Hill 2. Acquiescing Too Quickly 3. Gossiping 4. Not Protecting Yourself 5. Assuming Too Much

Takeaways from Ethical leadership and enron

1. Ethical money making in the "new" economy is the same way you make money in the old economy - by providing goods and services that have real value. 2. Good ethical corporate strategy cannot be substituted by innovative financial cleverness. 3. Moral disengagement is a higher risk when arrogance of corporate executives is high, rather than when executives demonstrate humility. 4. Excessive pay can lead executives to believe they are above the system and the rules and can be tempted to cut ethical corners. 5. Careful examination of and resistance to government deregulation are important ethical practices.

Two areas of the brain that are activated in ethics questions

1. PFC 2. Limbic

The productivity of CSR efforts have been limited because:

1. They pit business against society. 2. They pressure companies to think of CSR in generic ways instead of the way most appropriate to each firm's strategy.

Workplace Fraud

3-6

Miss Evers' Syndrome

A mix of milgram, asch, and stanford prison syndrome

Interpersonal Influence

Advice sought after by others

Agency

Aligning our loyalty

What is Self-Awareness?

An accurate view of traits, feelings, and behavior.

Deontology

An action is ethical if - Universal Principles - Rights - Reversibility - Justice

Ethics of Care

An action is ethical if it benefits those whom I have a special trust and obligation or the most vulnerable.

Free Will

Arbitrary isolated decisions

Things they know and I know

Arena

"Know Thyself"

Aristotle

Moral Cleansing

Bad on the scale

Justice

Benefits and Costs are equally distributed

Known to others and not self

Blind

Things they know and I don't

Blind Spot

Mirror Test

Can I look at myself in the mirror and respect myself after I do this?

Pillow Test

Can you sleep with your decision?

Aristotle's Virtues

Cardinal and Christian

Certain legal rights are enforced by statute:

Civil Rights Act Equal Pay Act Americans with Disabilities Act Age Discrimination in Employment Act Fair Labor Standards Act Occupational Safety and Health Act Family Medical Leave Act Employee Retirement Income Security Act

Direct Dissent

Costly! Use as last resort?

Suggest another alternative

Creatively transcend the tyranny of the either/or

The Categorical Imperative

Deontology - An ethical guideline developed by Immanuel Kant under which an action is evaluated in terms of what would happen if everybody else in the same situation, or category, acted the same way. - Truth is truth and everyone who uses reason should come to the same truth

Fairness or Equality

Does it unfairly impact anyone? Does it unfairly coerce? Does it interfere with others' rights? The focus is on the inequality that market choices may reflect

Involvement

Employees participate and have their ideas heard.

Line of Sight

Employees see the big picture and how their work contributes to it.

Workplace Fraud Prevention

Engaging employees is the most valuable method of preventing fraud

Vernon Smith, where do we live?

FIRST, in a world of personal exchange SECOND, in a world of impersonal exchange

Things I know and they don't

Facade

Moral Failure Syndromes

Failure to speak up can originate with: - Milgram Syndrome - Asch Syndrome - Stanford Prison Syndrome - Miss Evers Syndrome

Obedience

Free Will vs Agency

Social Astuteness

Friendly yet focused on commitment to values

Rewards and Recognition

Goals and values are clear, and contributing individuals can expect to be rewarded.

Moral Licensing

Good on the scale

Utilitarianism

Greatest happiness for greatest number of people. AKA Consequentialism (John Stuart Mill)

Double-effect rule

Harming another individual is permissible if it is the foreseen consequence of an act that will lead to a greater good; in contrast, it is impermissible to harm someone else as an intended means to a greater good.

The Fragmented Self

Having a public and private self that are not aligned in terms of your actions, beliefs, and ethics.

Appeals for more information

Help me understand exactly why we need to do this.

Known to self and not others

Hidden

Invoke organizational committment

How does this fit with our commitment to ______?

Universal Principles

I would be willing for it to become universal law

Sunshine/Disclosure Test

I would be willing to have it broadcast to the public

Self-Awareness and Ethics

If individuals could rid themselves of self-deceit, then they would be more capable of making [improved] moral decisions and leading nobler lives - Bok

Deontology and the brain

In Deontology, ethics is supposed to be the product of pure reason, belonging to the PFC, but it actually maps to the Limbic system.

When are there no social goods?

In a state of "nature" because the social cooperation needed to produce these things doesn't exist.

Information Sharing

Information goes in all directions to the people that need it.

Apparent Sincerity

Integrity

Of Fitness

It does what a reasonable person expects it to do

Express Warranties

It has to do what you promise.

Reversibility

It is reversible like the golden rule

How does fairness bias affect our ability to perceive risk?

It leads us accept losses in exchange for fairness.

How does framing and anchoring affect our ability to perceive cause?

It leads us to assume a stated cause is a normal cause.

How does availability heuristic affect our ability to perceive cause?

It leads us to assume available causes are regular causes.

How does the endowment effect/loss aversion affect our ability to perceive cause?

It leads us to attribute causes to unrelated events.

How does self-serving bias affect our ability to perceive cause?

It leads us to avoid seeing ourselves as a cause.

How does representativeness heuristic affect our ability to perceive cause?

It leads us to consider regular causes as permanent causes and rare causes as negligible.

How does framing and anchoring affect our ability to perceive risk?

It leads us to misperceive risk based on the context.

How does the endowment effect/loss aversion affect our ability to perceive risk?

It leads us to overpay to avoid a risk

How does fairness bias affect our ability to perceive cause?

It leads us to overvalue causes that violate our sense of fairness.

How does representativeness heuristic affect our ability to perceive risk?

It leads us to treat small risks as being zero risks and large risks as certainties.

How does self-serving bias affect our ability to perceive risk?

It leads us to trust unreliable perceptions of risk.

How does availability heuristic affect our ability to perceive risk?

It leads us to view available probabilities as normal probabilities.

Rights

It treats other people as ends in themselves and not just as means Ethics is the ends not the means

Pinto Case

Lecture 2-8

Moral Regulation

Normal on the scale - Donations to Charity - Environmental Purchases - Helping Strangers - Admitting Error - Agreement Keeping

Known to self and others

Open

What is our Duty (Deontology)

Our capacity to reason imposes a duty to use ethics

Availability Heuristic

Our tendency to use information that comes to mind quickly and easily when making decisions about the future. Focusing what is on the news as the only information relevant to the world and your decision and ignoring all other information.

A Disciple's Journey

PDF on schedule 10/21

Framing and Anchoring

People can be strongly influenced by the context in which information is given.

Endowment Effect & Loss Aversion

People tend to distort perceptions in a way that enhances self-esteem.

Self-serving bias

People tend to distort perceptions in a way that enhances self-esteem.

Representativeness Heuristic

People tend to make judgments based on how well the information represents the norm.

To be an ethical leader, one must understand and be adept at wielding

Power and Politics

Duty often comes from

Power not fault

Position Power

Power that derives from one's position in the organization and the resources one controls

Personal Power

Power that derives from one's relationship with others

Emphasizing other stakeholders (rather than shareholders) will:

Reduce shareholder power over companies Weaken shareholder returns on investment Discourage risk-taking by corporations, for fear of harming non-investors

The Power of Roles

Roles comprise powerful social scripts

Costco and Shareholders

Section 3-4

Do we have an ethical obligation to shareholders?

Serving shareholder interests is inherently ethical.

Recall of Tylenol

Session 3-6

Cognitive Moral Development

Stage 1 - Punishment Stage 2 - Exchange Stage 3 - Conformity Stage 4 - Social Accord Stage 5 - Social Contract Stage 6 - Universal Principles

Political Skills

The ability to effectively understand others at work, and to use such knowledge to influence others to act in ways that enhance one's personal and/or organizational objectives

Anchoring Effect

The common human tendency to rely too heavily on the first piece of information offered when making decisions

How do we justify ethical behavior when we are cynical of ethical behavior?

The more cynical you are the less inclined you are to justify doing the ethical thing. It is okay to be cynical but we need to know that going into a decision and determine what effect it has on our decision making process.

Of Merchantabiliity

The quality and usefulness must conform to the generally accepted practice in the industry.

Four Prevailing Justifications for CSR:

The wrong approach - moral obligation - sustainability - license to operate - reputation

How does unethical behavior destroy value?

There are increased transaction costs because distrusts breads the need for ladders (lawyers, securities, regulations AND warranties, duplications, delays)

Our Should Self

Thoughts about how we should behave

Impersonal Exchange

Through markets, where communication and cooperation gradually emerged in trade with strangers

Self-Awareness Iceburg

Tip - Behaviors Under - Attitudes, Perspectives, Desires, Identity

Not known to others or self

Unknown

Things I and they don't know

Unknown and further unconscious

Insight flows from

Unknown to Arena

Utilitarianism and the brain

Utilitarianism is based on the perception of happiness, which belongs to the limbic system, but it actually maps to the PFC.

Fairness Bias

Value cooperation and fair play over rational self-interest

Virtue Ethics and the brain

Virtue Ethics sees the whole brain informing the virtuous person.

Corruption

What are the potential implications? Does it create any social value? Most importantly, does it degrade? Does it treat something with a lower mode of valuation than is appropriate? The focus is on the resulting damage or dissolution that market relations may have on norms and attitudes.

Our Want Self

What we desire to do

Framing Effect

When our decisions are influenced by the way information is presented. Equivalent information can be more or less attractive depending on what features are highlighted.

Can good ethics be bad for business?

Yes, which is why we need other reasons to stay ethical. We need to be willing to face the costs of being ethical.

Negligence

You are responsible for designing or failing to warn about a product that is reasonably expected to cause harm

Strict Liability

You are responsible for manufacturing defects, regardless of reasonable expectations.

Using Ethical Frameworks

You don't have to limit yourself to just one framework. They can all help you reach, through reasoning, the best ethical decision.

Stakeholder

a person with an interest or concern in something, esp. a business

A Core Dimension of Humility

a personal characteristic that is associated with three facets

Definitive Stakeholders

all three attributes, high salience. Managers give immediate priority to these stakeholders.

Urgency

calling for immediate attention from a company

The activation in the brain

depends heavily on context.

Networking Ability

excels at knowing others

Legitamcy

having a socially accepted or preferred status with a company

Morality in the brain is

not a fixed activity like sight or hearing.

Latent Stakeholder

one attribute, low salience. Managers may do nothing about these stakeholders and may not even recognize them as stakeholders

Fraud Triangle

opportunity, pressure, rationalization

Two types of power

position power and personal power

Stanford Prison Syndrome

scripted role expectations

Power

the ability to get a company to do something it would not otherwise do

Character is

the sum of your actions

Personal Exchange

trading favors and friendship and of building reputations based on trust and trustworthiness in small groups and families

Expectant Stakeholders

two attributes, moderate salience. Active rather than passive. Seen by managers as 'expecting something'. Likely higher level engagement with these stakeholders.