Slide- CH 6

• Business ethics


  Rules, standards, codes, or principles that provide guidelines for morally right behaviour and truthfulness in specific situations
• Ethical leadership forms


  • Ethical
  • Responsible
  • Servant leadership
• Ethical leadership


  Communicate ethical standards and encourage ethical conduct
• Responsible leadership


  Narrow orientation focused on financial performance and extended orientation with stakeholder view
• Servant leadership


  Emphasizes concern for others, and combines motivation to lead with the need to serve others
• Statement of values


  Description of the beliefs, principles, and basic assumptions about what is desirable or worth striving for in an organization
• Key components of value statements


  • Key stakeholder interests to be satisfied and balanced
  • Emphasis on quality
  • Efficiency
  • Work climate
  • Observance of codes of conduct
• Code of conduct


  Explicitly states what appropriate behaviour is by identifying what is acceptable and unacceptable
• Code of ethics


  A statement of principles or values that guide behaviour by describing the general value system within which a corporation attempts to operate in a given environment
• Codes of conduct are enforced by an external power and authority; convey rules that tell people what they must or must not do. Members of organizations must obey or face penalties for failing to do so.
• Codes of ethics suggest guidelines to follow and empower individuals to act according to their consciences. Penalties are not imposed and writers emphasize the qualities they think members should have.
• Types of codes


  • Corporate or business enterprise
  • Professional organizations
  • Industry and sector
  • Single issue
  • Codes from national and international bodies
• How codes institutionalize ethical behaviour

  • Increasing awareness
  • Discouraging ethical apathy
  • Facilitating ethical decision making
  • Making it easier to refuse an unethical request
• Generations of code content evolution

  • First generation: conflict of interest
  • Second generation: commercial conduct
  • Third generation: employee rights and motivation of the workforce
  • Fourth generation: wider responsibility, with attention on environment and respect for communities
  • Fifth generation: international concerns, including human rights, the rule of law and labour conditions
• Criticisms of codes


  • Unenforceable standard
  • Unnecessary, as most corporations operate at ethical level above code
  • Only necessary for the less scrupulous
  • Penalties may be insignificant
  • Convincing everyone to comply is not easy
  • Often idealistic and written in meaningless generalities
  • Merely to control competitive conduct among corporations, designed to prevent government legislation
  • Serve as a response to public criticism
• Ethics training


  Teaching employees about the values and policies on ethics they should follow in their decision making
• Ethics training methods


  • Managers or outside consultants
  • Addressed to all levels of employees, with emphasis on management
  • Online exercises
  • Practical checklists and tests to evaluate actions
• Nash checklist


  Plainly worded questions should be used by managers when examining ethics of a business decision
• Pagano model tests


  • Is it legal
  • Benefit/cost test
  • Categorical imperative
  • Light of day test
  • Do unto others
  • Ventilation test
• Conflict of interest


  Situation in which an individual has a private or personal interest that is sufficient to appear to influence the objective exercise of that individual's duties
• Types of conflicts of interest

  • Real - exists
  • Apparent - doesn't exit but could be perceived as such
  • Potential - may develop into one
• Common conflicts of interest

  • Self-dealing
  • Accepting gifts or benefits
  • Influence peddling
  • Using employer's property
  • Using confidential information
  • Outside employment or moonlighting
  • Post-employment
  • Personal conduct
• Ethics audit


  Systematic effort to discover actual or potential unethical behaviour in an organization
• Ethics officer


  Independent manager who reports to the board of directors or CEO, reviews complaints or information, and recommends action if necessary
• Compliance officer


  Ensures all employees are familiar with corporation's policies and codes, and with government laws and regulations
• Ethics committee


  Group of directors, managers or staff formed to monitor ethical standards and behaviour
• Ethics reporting systems


  Corporations have established systems like hotlines so they can become aware of issues and concerns relating to corporate ethical conduct
• Whistleblowing


  Act of voluntary disclosure of inappropriate behaviour or decisions to persons in positions of authority in an organization
• Ethical implications of whistleblowing


  • Remain silent, quit, or disclose wrongdoing?
  • Range of concerns from clearly illegal to maybe illegal to issue of morality
  • Does obligation to employer supersede obligation to self, profession, or industry?
  • Will the whistleblower be believed?
  • Is the whistleblower a hero or a snitch?
  • When and who to tell?
  • What will the consequences be?
• Boards of directors' tasks for ethics

  • Collectively identify values that determine acceptable behaviour in the firm
  • Put in place a process that ensures values are reflected in action
• Success of ethics programs depends on commitment of top management

  • Announce the program
  • Champion its development and implementation
  • Aspire to lead in an ethical manner
• Management and leadership models


  • Immoral
  • Amoral
  • Moral
• Immoral leadership


  A posture or approach that is devoid of ethical principles and actively opposed to what is moral
• Amoral leadership


  A posture or approach that is without ethics, but not actively immoral
• Moral leadership


  Conform to high standards of ethical behaviour or professional standards
• Approaches to ethics programs

  • Formal approach
  • Monological approach
  • Dialogical approach
• Formal approach


  Based on organizational norms that are written as a code of conduct
• Monological approach


  Allows organizational managers and employees to determine for themselves what is right or wrong
• Dialogical approach


  Emphasizes communication before decisions are made and implemented
• Compliance versus values-based programs

  • Compliance-based
  • Values-based