Business Ethics Midterm Exam

integrity based approach

- Combines concern for law with employee responsibility - Promotes acting with integrity and conduct business with honesty and fairness

Ethical Blind Spots

-Overestimating our ethicality -Forgiving our own unethical behavior -In-group favoritism -Implicit prejudice -Judging based on outcomes, not the process

Sarbanes-Oxley Act

A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.

what is the definition of an ethics audit?

An investigation into the ethical climate of the firm

Apathetic Leader

Are not necessarily unethical, but they care little for ethics within the company. This leader does not listen to employees and does not communicate well. They display no passion for the firm or the mission of the organization.

Why are hotlines useful in a firm?

Because they allow the caller to remain anonymous

which statement best describes codes of ethics?

Formal statements describing what an organization expects of its employees

DaVita's Culture

Helping employees find joy and meaning in their lives.• Creating a sense of community.• Being very intentional about the culture he was trying to create -Every company has a college whether they intentionally created it or not.

what is the definition of ethical issue intensity?

How important an ethical issue is perceived to be by a company or individual

Why is shared leadership important?

It establishes checks and balances on every member of the organization

Apathetic Organizational Culture

Minimal concern for people or performance -tends not to last very long -Ex. Countrywide Financial

Exacting Organizational Culture

Minimal concern for people; high concern for performance -Ex. UPS

describe leader-follower congruence

The ability to identify and work with the leader to achieve common ethical objectives

what is a characteristic of an ethical leader?

They have the passion to do the right thing

what likely contributed to the flawed corporate culture at Countrywide Financial?

a flawed incentive system

Unlike an ethical issue, in an ethical dilemma _____________.

all have negative consequences

authentic leadership is characterized by leaders who

are passionate about company goals, display corporate values in the workplace, and form long-term relationships with stakeholders

which statement is true regarding the aftermath of the financial crisis?

consumer trust of business hit a low point

which word best describes a compliance orientation?

contractual

what is one way that ethical leaders can empower employees?

creating an open communication environment

coaching leaders

develop people, establishing a relationship and trust -transformational

ethical leaders should be

empathetic and flexible

which of the following information does an ethics audit try to collect?

employees' perception of the firm's ethical culture

ethical leaders...

encourage the development of other leaders within the organization recognize their weaknesses rely on others to help address those concerns encourage employees to reach their full potential emphasize their role as important players in the company institute policies that will provide incentives to those who train new leaders

Employees disagreeing about the most ethical decision, for resolving an ethical dilemma, is an example of:

ethical diversity

ethical investing

investing in companies that not only seem profitable, but also consider their impact on communities and the environment

according to Howard Schultz, which of the following is true about ethical leadership?

it is about finding a way to balance between profitability and social consciousness

ethical diversity

refers to the fact that employee values often differ from person to person

which of these is the least likely to influence an individual's personal ethics?

regulatory guidance

legitimate power

the power a person receives as a result of his or her position in the formal hierarchy of an organization -used to promote ethical conduct

Ethical Issue Intensity

the relevance or importance of an event or decision in the eyes of the individual, work group, and/or organization -how important an ethical issue is perceived to be by a company or individual

Loss Aversion Bias

we irrationally prefer avoiding loss about twice as much as acquiring gains

Integrative Organizational Culture

High concern for people and performance -Ex. New Belgium Brewery

Daniels Fund Ethics Initiative Principles

Integrity --- Act with honesty in all situations Trust --- Build trust in all stakeholder relationships Accountability --- Accept responsibility for all decisions Transparency --- Maintain open and truthful communications Fairness --- Engage in fair competition and create equitable and just relationships Respect --- Honor the rights, freedoms, views, and property of others Rule Of Law --- Comply with the spirit and intent of laws and regulations Viability --- Create long-term value for all relevant stake

Business Structure

The company's configuration of employees for accomplishing specific business tasks; how the business is organized Board of directors, CEO, R&D/Production/Marketing and Sales/Finance/Administration

Secondary Stakeholders

any group that can influence or be influenced by a company and can affect public perceptions about the company's socially responsible behavior -mass media, special interest groups, trade associations, and competitors

stakeholders

any individuals that have a stake in the organization -consumers, employees, investors, or stockholders and regulators (primary stakeholders)

While these leaders do not necessarily commit misconduct, they care little for ethics in the company

apathetic leaders

in this section, ________ _________ was identified as the best way to identify misconduct in an organization

employee reporting

organizations that reward high performance without considering how the results were achieved are

more likely to have employees engage in unethical behavior

what similarity do they share that contributes to their firm's ethical cultures?

they have the ability to align employees behind a common vision

why are principles and values so important to companies?

they provide guidance for employees and leaders in making ethical decisions

Which tends to be the most observed misconduct in the workplace?

time theft

Benefits of Companies Embracing Ethical Leadership

-employees can help uncover fraudulent behavior before it can do extensive damage -The Ethisphere Institute reports that stocks of companies deemed to be the most ethical surpass those on the S & P 500 index

authentic leadership

A pattern of leadership behavior based on honesty, practicality, and ethicality

IT

Integrity Trust

Locus of control

a person's tendency to perceive the control of rewards as internal to the self or external in the environment

What is a good way to manage a crisis?

act quickly and take responsibility for this issue

conformity bias

groupthink occurs when people's desire to maintain group loyalty becomes more important than making the best choices

Caring Organizational Culture

High concern for people; minimal concern for performance -Ex. Zappos

which statement is true about a compliance orientation and a values-based orientation within a company?

both orientations can increase ethical awareness among employees

If Steve Jobs was admired for his knowledge of Apple products, he displayed _________.

expert power

artifacts

items that provide important information on a firm's organizational culture -can be observable, but can also consist of rituals and company stories

framing bias

people make more or less ethical decisions depending on how an issue is framed

Deontology approach

right/wrong based on the action rather than the circumstances What would I do if I wanted to follow the rules and I'm not really concerned with the consequences of my decision?

norms

rules and expectations by which a society guides the behavior of its members

Ethical Leadership is

salient to every employee varies at different levels all employees can participate lower level employees need to gain knowledge and perspective to prepare for assuming more roles in ethical leadership

reward power

seek to influence followers by offering rewards for desired behavior -can be a strong motivator for desired behavior -should be used with caution -leaders must ensure employees who reach certain goals are achieving those goals ethically

pacesetting leaders

set high standards and expect excellence

Ethical Gray Area

signifies an ethical dilemma, where the border between right and wrong is blurred

section 302 of Sarbanes Oxley

Principal executive and financial officers must certify that they are responsible for establishing and maintaining the system of internal control over financial reporting.

As a company that places employee well-being over company performance, Zappos displays a _________ culture.

caring

By being highly persuasive and skilled at getting employees to adhere to a common goal or mission, Zappos CEO Tony Hsieh displays what kind of leadership style?

charismatic leadership

at Enron, the lowest 20% of performers were systematically fired. This could be an example of

coercive power

what is one of the biggest ethical risks that companies face?

complacency

This approach emphasizes obedience to legal requirements.

compliance based approach

which statement is true about the ethical decision making of leaders?

ethical leaders must often make trade offs

which of the following differentiates ethical leaders from less ethical leaders?

how they respond to mistakes

Empowered employees

report misconduct by developing reporting mechanisms hotlines are a must in any organization that is serious about ethics

responsibilities of ethics officers

-Assess the needs and risks of an organization-wide ethics program -Develop and distribute a code of conduct or ethics -Conduct training programs for employees -Establish and maintain a confidential service to answer employees' questions about ethical issues

Three primary messages

1. People make most of their decisions instinctively rather than rationally. In other words, most ethical decisions are made by feeling, not by carefully analyzing the situation 2. People tend to believe they are lading ethical lives while simultaneously doing things that ethical people wouldn't do 3. Usually people who make unethical decisions are unconsciously influenced by: cognitive biases, social and organizational pressures, situational factors that they don't even notice

Section 406 of the Sarbanes-Oxley Act

A section of the act that requires a public company to disclose whether it has adopted a code of ethics for senior financial officers.

what are the benefits of ethical leadership?

Employees are more willing to work for ethical companies.

what is true about ethical leaders?

Ethical leaders place company interests above their own.

FRRV

Fairness Respect Rule of Law Viability

Conscious Capitalism

Following organizational policies and practices that both enhance the success of a company and advance the economic and social conditions of the communities in which the company operates. The organization has a higher purpose -it's not just about the bottom line -which ironically tends to help the bottom line 2) Stakeholder orientation approach to business 3) Leadership cares and leads by example 4) The organization has a caring culture/it's a great place to work

Enron

In November 2001 Enron, the United States' seventh largest corporation, issued a statement drastically revising its stated profits over the past three years. Within a month, the company was forced to declare bankruptcy—the largest bankruptcy in business history—and numerous charges surfaced that the company had engaged in a repeated pattern of un-ethical and perhaps illegal practices. In addition to shareholder and employee lawsuits, Enron's executives also faced potential criminal charges for their roles in the scandal.

IT AT FRVV

Integrity Trust Accountability Transparency Fairness Respect Rule of Law Viability

describe the purpose of ethics training

It allows employees to prepare themselves for issues they might encounter in the workplace.

what is the purpose of a code of ethics?

It provides guidelines to help employees recognize and resolve ethical issues

Aggregation of marginal gains

It teaches that each good habit builds upon the last and compounds to produce an exponential return.

My Integrity Principle

Lead by example and enact the change you wish to see

Dave's Leadership styles

Leadership is about relationships every single day -am I leaving people better or worse than before they interacted with me?• It's important to build trust.• Ethics needs to be foundational.• What a person does "on stage" and "off stage" is critically important.• You need to be authentic.

what is organizational ethics?

Right or wrong, acceptable or unacceptable conduct in an organizational environment

compliance based approach

Seeks to avoid legal sanctions Emphasizes threat of detection and punishment to promote lawful employee behavior

Public Company Accounting Oversight Board (PCAOB)

The group charged with determining auditing standards and reviewing the performance of auditing firms.

rank and yank

The management practice of ranking employee performance and dismissing those near the bottom even when they are fulfilling their duties adequately

Unethical Leader

Weak moral person and weak moral manager Drive to reward their own self-interests Examples include Jeff Skilling, Bernie Ebbers, and Dennis Kozlowski

what is the definition of groupthink?

When people in a group go along with the group decision.

code of ethics

a formal statement of ethical principles and rules of conduct

power

a key component of leadership

Dodd-Frank Act

a law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversight of financial markets and placed limitations on risky financial strategies such as heavy reliance on leverage

An "ethical blind spot" refers to ___________________.

a person's underestimation of his or her potential to commit misconduct

Integrity Principle

act with honesty in all situations

what is a necessary component of an ethical corporate culture?

an ethics program

which definition describes an ethical issue?

an identifiable problem, situation, or opportunity that requires a person or organization to choose among several actions that may be evaluated as ethical or unethical

ethical issue

an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

why might a company not want to investigate reports of misconduct?

an investigation is often time consuming and expensive

cognitive biases

an involuntary pattern of thinking that produces distorted perceptions of people, surroundings, and situations -mental shortcuts that help us make decisions more quickly based on what we've experienced

Countrywide Financial did not appear to care for employees' well-being or the long-term well-being of the firm. It can best be described as having a(n) __________ culture.

apathetic

principles

behavioral boundaries that are more universal in nature -trust, property rights, accountability, responsibility, and the spirit and intent of the law

ethical conduct often results in

better financial results better reputation better relationships with stakeholders better work experience for employees

character

empathy, flexibility, and persistence in business. also requires the adoption of company values and the willingness to take responsibility for meeting stakeholder needs

what is true about the influence of ethical decision making factors in an organization?

employee decision making is often affected more by organizational relationships

social learning theory

employees develop role models within the organization they model themselves after

what is true about how ethical leaders should perceive stakeholders?

ethical leaders view stakeholders as important co-contributors of firm value

Rights Approach

ethical philosophy that advocates the decision that does the best job of protecting the moral rights of all What would I do if I wanted to honor the moral rights (life, liberty, freedom of religion, property ownership, etc.) of all who have a stake in this situation? Note that people don't make or unmake moral rights -all people should have these rights.

Virtue approach

ethical philosophy that advocates the decision that is in agreement with certain ideal values What action would help me be the sort of person I want to be—is this action consistent with me acting at my best—is it consistent with the values I want to embrace?

While ________ cultures do not necessarily ignore employee well-being, they tend to emphasize company performance first.

exacting

Why is expert power one of the more effective forms of power a leader can demonstrate?

followers are able to trust the leader's expertise and credibility

ethical leaders must ________ ethical issues and risks

identify

Why might ethics mistakes actually improve an organization in the long-run?

they give the firm an opportunity to learn from its mistakes

those with an internal locus of control believe

they have control over events in their lives

Primary Stakeholders

those who have a formal and/or contractual relationship with the firm, such as customers, suppliers, employees, regulators, investors, and communities

Sam Walton, founder of Wal-Mart, would often travel to different stores across the nation to personally meet employees and praise them for their hard work. By actively promoting a shared vision among employees, Sam Walton was a _________________________.

transformational leader

referent power

power that comes from subordinates' and coworkers' respect, admiration, and loyalty

Based on our definition, how should companies approach principles?

there should be zero tolerance for employees to violate them

what is the first step organizations must take to meet the needs of their stakeholders?

gather data on the company's stakeholders

key provision of dodd-frank

instituted a whistle-blower program--10 to 30% if convictions result in more than $1 million in penalties

Affilative Leader

lead by connecting emotionally

democratic leaders

leaders who delegate authority and involve employees in decision making -encourages employee participation (transformational)

Transactional Leadership

leadership based on an exchange process in which followers are rewarded for good performance and punished for poor performance

principles, values, _____, and _________ form an organizational culture

norms, artifacts

core practices are

not legally mandated but are considered best practices of the industry.

ethical dilemma

occurs when a company finds itself in a situation where all the alternatives aren't satisfactory -no right answer

ethics officer

someone trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas

ethical value system

the basis for your decision making and your understanding of why you will or will not take a particular stand or action

which of these stakeholders is a secondary stakeholder?

special interest groups

a values orientation should possess

strong communication systems

values

subjective and enforced by society -integrity, accountability, fairness, and trust

Ethical Relativism

suggests that what is ethical in one culture is not necessarily the same as in another culture

An ethics officer can do little good without

support from top management and board members

opportunity

tends to coincide with where employees work, with whom they work, and the type of work they do

coercive power

influencing with threats of punishment (short run)

emotional intelligence

the ability to perceive, understand, manage, and use emotions

Transformational Leadership

transforms employees to pursue organizational goals over self-interests

We described 5 examples of ethically challenged CEOs. What is not one of the mistakes they made?

giving employees more decision making authority

Utilitarian Approach

guided by what will result in the greatest good for the greatest number of people What would I do if I was trying to produce the most good for the most people and do the least amount of harm—even if a few people might suffer?

unethical conduct

in organizations relates directly to judgments about APPROPRIATE behavior -misconduct is kind of a continuum which can escalate all the way to becoming illegal -any misconduct that HARMS OTHERS (employees, customers, shareholders)

why would an organization not want to rely solely on an individual's personal ethics?

individual personal values differ significantly and can result in unethical conduct

which definition best describes ethical leadership?

influencing others to ethically achieve company goals

expert power

power that is based on the special knowledge, skills, and expertise that a leader possesses -one of the most effective forms of power -not limited to those in positions of authority

authoritative leaders

the type of leader who provides a team with a vision and mobilizes people to work toward that vision (transformational)

why would it be a mistake to ignore secondary stakeholders?

they can be an ally or a threat to an organization

many individuals caught in misconduct claim they were "just following the orders" from their superiors. What type of power might this reflect on the part of the leader?

legitimate power

2008 Mortgage Crisis

major contributor to global decline in home ownership, middle class security, urban well-being, the housing industry, and stock market stability brought on by deregulation of the banking/mortgage industry and non-enforcement of remaining home finance laws which allowed predatory lending that caused millions of US homeowners to lose their homes to the big banks; result was entire neighborhoods being abandoned, rising homelessness, falling home prices, and utilization of the "too big to fail" rule to pour tax dollars into saving the banks, but not the homeowners

ethical fading

occurs when we are so focused on other aspects of a decision that its ethical dimensions fade from view

Ethical Leader

one who is both a moral person and a moral manager influencing others to behave ethically

overconfidence bias

our tendency to be more confident in our ability to act ethically is objectively justified by our abilities and moral character

self-serving bias

people gather and process information in a self-serving way and fail to see and/or object to unethical behavior that serves their self-interest

behavioral ethics

the study of why people make the ethical and unethical decisions that they do

a transactional leader

tries to create employee satisfaction by negotiating for levels of performance

charismatic leadership

type of influence based on the leader's personal charisma -highly persuasive

which of the following statements is true about ethics?

unethical conduct is not always black and white

While principles are more _________ in nature, values are more __________ and tend to be enforced by society.

universal, subjective

AT

Accountability Transparency

Tangible and Abstract Bias

people remember immediate and tangible factors at the expense of more removed and abstract factors -purchasing inexpensive inventory that is made by labor working in horrible conditions so you can make a greater profit -not recalling a product that could be harmful to your customers

competence

the knowledge and the ability to perform certain tasks and handle difficult situations

open door management

Always working with your office door open to show that you are available to everyone all the time

coercive leaders

tend to be authoritative and enforce their decisions without any discussion. -use threats of punishment to lead

what constitutes a conflict of interest?

the best interest of an individual are placed above the interests of the company

Stakeholder Orientation

the degree to which a firm understands and addresses stakeholder demands perspective is when you go beyond the bare minimum ethical requirements.• In fact, it advocates maximizing positive outcomes to meet stakeholder needs by answering these questions: Who are our stakeholders? What's important to them?

organizational culture

the set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization

section 201 of sarbanes oxley

prohibits public accounting firms from providing both non audit and audit services to a public company

Leaders who display good character________________________.

take responsibility for ethically meeting stakeholder needs

incrementalism

the slippery slope is when a person gets used to making minor infractions and doesn't notice when minor infractions start giving way to major ones -boiling frog syndrome

Authentic Leadership

the view that effective leaders need to be aware of, feel comfortable with, and act consistently with their values, personality, and self-concept -ex. new belgium brewery

groupthink

when employees go along with group decisions even when those decisions conflict with their values