Ch. 8: Ethics

The eight key ethical standards are as follows:

1. Fiduciary principle: Act in a way that reflects the best financial interests of the company and its investors. 2. Property principle: Respect the rights of those who own property. For instance, consider the effect your business might have on those who own property in the area you are conducting business in. 3. Reliability principle: Take commitments, agreements, promises, and contracts very seriously. By not appropriately following through on these steps, a manager risks damaging his/her credibility. 4. Transparency principle: Conduct business in a truthful and open manner. If managers are confident in how they conduct business and conduct themselves, then they should be comfortable sharing information with others. 5. Dignity principle: Have concern for how you treat stakeholders, especially when making adverse decisions regarding things such as layoffs, safety recalls, or compensation. Respect the dignity of all people. 6. Fairness principle: Ensure that you are treating others reasonably in all situations. Deal fairly with all parties involved. 7. Citizenship principle: Be a good corporate citizen by being willing to give back to communities through scholarships, community service, sponsoring local events, or simply helping out in times of need. This is also known as corporate social responsibility. 8. Responsiveness principle: Set up procedures for responding to and resolving stakeholder issues (e.g., rebates, product repairs, account issues). Be responsible to the claims and concerns of others.

four key questions to be asked when faced with an ethical decision

1. Is the action consistent with the party's basic duties to others in the situation? 2. Does it respect the rights or basic entitlements of the affected parties in the situation? 3. Does it reflect best practice ideals for your company, profession, and/or industry? 4. Is it compatible with the party's own deeply held commitments and personal values? If the answer to all of these questions is a definite "yes," then the situation being dealt with is probably ethical.

There are four key benefits to companies that establish a strong code of ethics:

1. societal improvement 2. moral compass 3. legal safety net 4. public image

Finally, the decision-maker should come to a decision on what the next right step is in the ethical dilemma. There are three tests to evaluate the decision-maker's course of action.

1. visibility test 2. generality test 3. legacy test

Explain how an employee's behavior can be ethically influenced.

A code of ethics influences an employee's behavior by informing the employee of what actions are considered ethical/unethical. The code of ethics guides employee decisions when the "right" thing to do may not be very clear. Thus, in a workplace context, the code of ethics tells an employee how to act ethically while at work. Additionally, the passage of the Sarbanes Oxley Act in 2002 now requires public companies to have a code of ethics for top executives, so these individuals are constantly reminded to make ethical decisions. Whistleblower hotlines allow employees to report potential ethics violations to an anonymous hotline. This influences employee behavior because it deters other employees from acting unethically. If employees fear that they may be reported to a hotline, then they are likely to make a more ethical decision. Ethics hotlines allow an employee to anonymously call in to a hotline to receive advice on the correct/ethical decision to make. This influences employee behavior because the ethics coach on the other end of the phone call can encourage an employee to take an action that is the most ethical. Thus, the employee can rely on the ethics coach to help make the decision, rather than his/her own personal judgment. Implementation of an ethics officer within the company helps to improve compliance with the code. If employees know that they have to report to an ethics officer, then they are more likely to act ethically. Additionally, the ethics officer can require trainings or seminars for individuals to ensure compliance with the code of ethics. Ethics training and continuing education allow employees to go through various ethical-dilemma scenarios and can help an employee in the future determine correct and ethical decisions when the time calls for it. These trainings influence behavior because employees may remember "practice" scenarios during real life, and thus apply what they learned during these sessions to their job functions.

• Public Image:

A recent study showed that, in a one-year period, over half of customers reported that they purchased from a company or recommended a company based on its reputation. Additionally, involvement in unethical acts can have a detrimental effect on a company's reputation. Companies seen as being ethical are highly respected and admired in the public, and customers are more likely to choose them because of it. This helps companies gain customers who are extremely loyal to their products or services.

Role of an ethics officer

An ethics officer is an individual hired by a company to be responsible for making sure that all employees are trained to be ethically aware, that ethical considerations enter the decision-making process, and that employees follow the company's code of ethics. This person is responsible for ensuring that a consistent firm-wide policy on ethical behavior and responsibility is accomplished.

• Organizational Reward Systems:

Behavior is motivated by the consequences associated with those actions. Reward systems, such as incentives, merit pay, or recognition programs, are typically based on bottom-line performance results. Employees are being told that they need to behave ethically, but are being judged based on their performance. In this situation, employees may be forced to choose between ethics and desired results. Because they are reviewed on and rewarded for the latter, that is likely what they will choose.

List and describe five good ways to evaluate and benchmark a code of ethics' effectiveness.

Employee Surveys: Surveys measure a combination of actual behavior (such as whether respondents acted under certain circumstances), as well as employees' perceptions of the organization's ethical climate (such as whether they feel pressure to compromise their ethical standards or fear retaliation if they report misconduct). Interviews and Reviews: Individual interviews, group interviews or focus groups, and reviews of relevant internal documents (such as policies, annual reports, executive speeches, new employee orientation materials, and leadership education materials) should be used to measure how well implemented the company's code of ethics is. Independent Audits: Many organizations engage independent third parties to audit their ethics and compliance programs. They evaluate against world-class standards as well as the organization's specific risk profile, and assess the program's effectiveness through document reviews, employee surveys, interviews, and focus groups. Helpline Analysis: Analyzing helpline calls is an effective way to evaluate the impact of ethics and compliance programs. Important indicators include: The number of anonymous calls, The number of callers who attempted to resolve the issue locally first, and The substantive nature of the call (in other words, whether calls were about ethical or legal issues as opposed to HR-related complaints). Helpline call volume analysis may be most meaningful when it's tracked over time or when combined with call content information. In addition, "after-action" research can be extremely useful in interpreting helpline data and improving the process. Some organizations, for example, routinely conduct "customer satisfaction" surveys before closing a case file, which may ask questions such as: Were you aware of the company's code of conduct? Did you consult the code of conduct before you called the helpline? Did the code help you determine whether the conduct in question raised ethical or legal issues? How difficult was it for you to make the decision to call the helpline? Ethics and Compliance Officer Feedback: This feedback may be the most useful because the ethics officer deals with ethical situations and training in the job role. Since the ethics officer is in charge of overseeing the ethics of a company, he/she usually has a good gauge of how well the company is implementing its ethics policies.

What are the most common motives for unethical behavior in the workplace?

Entitlement: Taking from an organization because of how the leaders treat employees. Retaliation: Revenge or entitlement without tangible value. Self-Protection: Acting unethically as a survival strategy. Arrogance: Feeling indispensable or immune from negative consequences. Challenge: Excitement of seeing if something can be done.

• Societal Improvement:

Ethical behavior is a win for all parties. Customers who use a company's products or services have a better quality of life. Company employees also may enjoy a higher standard of living as ethical companies typically offer better treatment, benefits, and compensation.

• Weak Leadership:

If managers in an organization do not consider ethics to be important, then it is not likely that their employees will either. If ethical behavior is not rewarded, it is more likely that unethical behavior will be ignored or encouraged.

• Moral Compass:

It is likely that an organization will face difficult situations that require tough decisions to be made, such as employee layoffs, deepening financial losses, or economic turmoil. Having a strong code of ethics in place helps management to make choices when these issues need to be addressed by providing an already established set of moral values.

Explain the positive aspects that a code of ethics brings to an organization.

Provides employees with behavioral expectations and ethical responsibilities. Helps an organization maintain overall goals and standards. Provides stability and visible guidelines. Reminds employees to look beyond the bottom line. Supplies employees the confidence and perseverance to perform their duties in a climate of integrity and support. Helps employees make the right decisions in difficult business situations. Helps employees know how and when to seek help during ethical dilemmas. Helps employees know where to report possible unethical conduct. A code of ethics helps to attract ethical employees but also deters and eliminates those who are prone to unethical behaviors. Companies with an effective code of ethics experience greater staff commitment and profitability. Three out of 4 people who work at an organization with a written code of ethics affirm that it helps them understand conduct that the organization values.

List and describe the many common subsections in a typical code of ethics.

Respect and Teamwork: Instructs employees how to deal with each other in the workplace and respect people for who they are. Race, religion, ethnicity, gender, sexual orientation, etc., all should be valued at a company. Business Ethics: Ethical decisions need to be made even though they may negatively affect the bottom line. Improper revenue recognition, stealing, kickbacks, unauthorized discounts, and other types of unethical business schemes need to be strongly prohibited. Honesty and Integrity: It should be made clear that truthful and honest people will be the only type of people allowed in an organization. Incidents of dishonesty and a lack of integrity should be considered as grounds for termination. Employees must be truthful to customers, suppliers, managers, investors, and each other. Respect for the Environment: A code of ethics should encourage recycling, conserving resources, limiting pollution, employee carpooling, etc. Compliance with Laws: A code of ethics should enforce all laws. Never should laws be broken to better the interests of a person or a company, even if the person or company does not agree with the particular legislation. Accurate Company Records and Public Disclosure: This is an extremely important section as truthful transparency to investors, customers, suppliers, and other stakeholders should be highly promoted. "Fudging" accounting numbers, shredding files, changing records, or inaccurate/false disclosure of information to the public must be explicitly prohibited. Conflicts of Interest: Examples include outside employment without proper company approval, using friends/relatives as suppliers even though they may not be the cheapest and/or highest quality, and accepting or giving bribes to government officials. Harassment and Discrimination: Any type of harassment including sexual harassment, stalking, or bullying should be prohibited. Additionally, discrimination in hiring, job functionality, promotions, or employment evaluation based upon race, religion, gender, sexual orientation, disability, or any other similar facet must be strictly prohibited and is usually against the law. Confidential Information and Protection of Company Assets: This section explains how much information an employee sees should be considered confidential. The code of ethics might explain methods of employee monitoring (such as computer use, web history, and email searches) to ensure the protection of company assets.

Abigail Baird

She tracked a group of freshman students throughout their first year of college--The results indicated that significant changes occurred in the brains of these individuals over the timespan of one year

ethos

The characteristic spirit of a culture, era, or community as seen in its beliefs and aspirations.

2. Generality test:

This test asks a manager to consider how he/she would feel if someone else was carrying out the situation similarly. Would I be comfortable if everyone in a similar position took the same course of action? If not, then the action should be reconsidered.

3. Legacy test:

This test asks managers to consider how their actions might impact how others view and remember them as a leader long term. Is this how I'd like my leadership position to be remembered? If not, the action should probably be reconsidered.

• Darwinian Culture:

This type of organization possesses a "survival of the fittest" mentality. It is characterized by cutthroat competition among workers and an intense pressure to succeed. Because employees are encouraged to outperform one another and told only the strongest will survive, this type of environment often leads to unethical decisions.

• Legal Safety Net:

What is legal and what is ethical is not always the same thing. When the legal system does not prevent a company from making an unethical choice, its ethical standards are in place to do just that. For instance, it may be legal for a company to launch an advertising campaign for an explicitly violent video game that targets young children. However, there are several potentially harmful effects that the game could have on these young children. Advertising the game to a young demographic is likely not the ethical choice, although it is legal.

• Bottom-line Mentality:

While achieving performance goals is important, companies often get so focused on achieving the desired numbers that they encourage employees to do whatever it takes, no matter what. Consequently, employees are doing just that. Employees are so focused on the bottom line that they are willing to cut corners whenever necessary, even if that means disregarding ethical policies and standards.

1. Visibility test:

Would I be comfortable with my actions being described in detail on the front page of a respected newspaper? If not, then the action should be reconsidered.

James Rest

adults throughout their 20s and 30s in terms of basic problem-solving strategies they use to deal with ethical issues.

Ethics

define a code that society or group of people adhere to (i.e., what society believes is right or wrong).

Morals

delve into right and wrong at a much deeper level, which is both personal and spiritual. Morals reflect one's own personal beliefs. Morals are beliefs based on practices or teachings regarding how people conduct themselves in personal relationships and in society, while ethics refers to a set or system of principles, or a philosophy or theory behind them. Therefore, morals usually refers to one's personal beliefs as to what is right and wrong, whereas ethics are usually a standard that applies across a spectrum of individuals, usually of a common trade (i.e., ethical standards of attorneys, doctors, accountants, etc.).

• Lack of Operational Control:

if an organization fails to develop and implement a system that offers some oversight of employees (regular reports, phone calls, etc.), then these workers are left with opportunity to behave however they want or need to. Regular communication that reinforces company values and builds ties between management and employees ensures awareness of the organizational standards.

An ethical dilemma

is a situation that will generally involve a moral conflict.

Lawrence Kohlberg

it is believed that the critical time for developing morals and values is from birth to age 14. These morals are primarily originated from our parental influences. Formal education, religion, and government may also play a role in this development.

ethics

the discipline dealing with what is good and bad and with moral duty and obligation.

The following four types of ethical dilemmas commonly arise in a business environment:

• Bribes: Payments usually made "up front," are offered in order to influence a decision. In some countries, gifts and gratuities are an acceptable part of doing business. • Kickbacks: Someone who has gained something (i.e., a contract, a sale) through favorable treatment gives back part of the profits to the party providing the favor. • Confidentiality: Private information is revealed regarding a person or company to a public party that is not permitted to have that information. • Corporate Resources: Use of company supplies or equipment for personal tasks, or taking the supplies home for personal use, may constitute misuse of company assets.

common causes of unethical behavior:

• Organizational Reward Systems • Bottom-line Mentality: • Lack of Operational Control: • Darwinian Culture: • Weak Leadership: