October 20 2018 3245

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Business Finance

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1,250-word (not including references as word count) count minimum with three scholarly sources in APA format. Q1 and Q3 are straightforward and both can be answered fully using material in the Read and Attend sections.

In Q2, it isn't necessary to focus on Warren Buffet specifically. Instead, look at whether leaders should trust people based on their character or whether leaders should focus more on codes and compliance to maintain an ethical organization. In other words, the question is asking if ethical behavior is primarily due to internal, individual factors, or if ethical behavior is influenced more by external factors.

Q4 is asking something very similar to Q2. Generally, the two questions should reach similar conclusions. If they don't, some additional explanation may be needed. Details about that are in Q4.

Q2 and Q4 will both be stronger with the use of outside sources.

Remember that a total of three sources, including the book, are required for the Complete assignment.

1. Review the habits of strong ethical leaders in Chapter Five. Evaluate yourself on each of those habits, then identify and describe specific areas where you need to change to be a more ethical leader.



2. Read the Chapter Five debate issue on page 138. Clearly state whether you think

1) Warren Buffett is correct in trusting his managers based on their character, or

2) Buffett needs to focus more on ethical codes and compliance.

Explain your answer.



3. “Individuals use different moral philosophies depending on whether they are making a personal decision or a work-related decision” (Ferrell, Fraedrich & Ferrell, 2013, p. 166). Review the moral philosophies described in Chapter Six, and answer the following:

1) Which moral philosophy best describes your personal decision making? Explain using an example from your own experience.

2) Which moral philosophy best describes your work-related decision making? Explain using an example from your own experience.



4. After reviewing the material on white collar crime (pp. 169-172), read the Chapter Six debate issue on page 171. Clearly state whether you think

1) White collar criminals have underlying psychological disorders that encourage misconduct, or

2) White collar crime is the result of weak organizational cultures and codes.

Explain your answer. Note: the question is not suggesting that an underlying psychological disorder is a legal defense for white collar crime.

The second question (Warren Buffett) also looks at whether ethical behaviors come from inside the individual or whether ethical behavior are influenced by organizational codes, culture and compliance.

3) Have you taken similar positions in both Q2 and Q4? If not, explain.

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CHAPTER 5 R I C A R D , A D R I E N N E 9 T S ©Stanislav Bokrach, Shutterstock ETHICAL DECISION2 MAKING AND 4 ETHICAL LEADERSHIP 7 Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER OBJECTIVES CHAPTER OUTLINE t To provide a comprehensive framework A Framework for Ethical Decision Making in Business Ethical-Issue Intensity for ethical decision making in business t To examine the intensity of ethical issues as R an important element influencing the ethical decision-making process I t To introduce individual factors that may influence ethical decision making in business t To introduce organizational factors that may influence ethical decision making in business C A R D , t To explore the role of opportunity in ethical decision making in business A t To explain how knowledge about the ethical D decision-making framework can be used to R improve ethical leadership t To provide leadership styles and habits thatI promote an ethical culture E N N E AN ETHICAL DILEMMA* 2 4 7 9 T S Troy Buchanan was in a bind. As a recent graduate of a prestigious journalism school, he had taken a job in the editorial department of Circa Communications, a fast-growing company in the online publications industry. Circa relocated Troy, his wife, and their two-year-old son from the Southwest to Atlanta, Georgia. On arriving, they bought their first home and Individual Factors Organizational Factors Opportunity Business Ethics Evaluations and Intentions Using the Ethical Decision-Making Framework to Improve Ethical Decisions The Role of Leadership in a Corporate Culture Leadership Styles Influence Ethical Decisions Habits of Strong Ethical Leaders Ethical Leaders Have Strong Personal Character Ethical Leaders Have a Passion to Do Right Ethical Leaders Are Proactive Ethical Leaders Consider Stakeholders’ Interests Ethical Leaders Are Role Models for the Organization’s Values Ethical Leaders Are Transparent and Actively Involved in Organizational Decision Making Ethical Leaders Are Competent Managers Who Take a Holistic View of the Firm’s Ethical Culture Understanding Ethical Decision Making and the Role of Leadership a second car. Troy was told that the company had big plans for him. Therefore, he did not worry about being financially overextended. Several months into the job, Troy found that he was working late into the night, and even on his days off, to complete his editorial assignments before the deadlines passed. He knew that the company did not Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 128 Part 3: The Decision-Making Process want its clients billed for excessive hours and that he needed to become more efficient if he wanted to move up in the company. He asked one of his co-workers, Mary Jo, how she managed to be so efficient in completing her editing duties. Mary Jo quietly explained: “Troy, there are times when being efficient isn’t enough. You need to do what is required to get ahead. The owners just want results—they don’t care how you get them.” “I don’t understand,” said Troy. “Look,” Mary Jo explained, “I had the same problem you have a few years ago, but Mr. Hunt [the supervisor of the editorial department] explained that everyone works ‘off the clock’ so that the editorial department shows top results and looks good. And when the editorial department looks good, everyone in it looks good. No one cares if a little time gets lost in the shuffle.” T Troy realized that “off the clock” meant not reporting all the hours required to complete a project. He also remembered one of Circa’s classic catch phrases, “results, results, results.” He thanked Mary Jo for her input and went back to work. Troy thought of going over Mr. Hunt’s head and asking for advice from the general manager, but he had met her only once and did not know anything about her. QUESTIONS | EXERCISES R 1. What should Troy do? I 2. Describe one process through which Troy might Cattempt to resolve his dilemma. 3.A Consider the impact of this company’s approach on young editors. How could working long hours Rbe an ethical problem? D , *This case is strictly hypothetical; any resemblance to real persons, companies, or situations is coincidental. A o improve ethical decision making in business, one must first understand how individuals make ethical decisions in anDorganizational environment. Too often it is assumed that individuals in organizations make ethical decisions in the same way that R they make ethical decisions at home, in their families, or in their personal lives. Within I however, few individuals have the freedom to the context of an organizational work group, decide ethical issues independent of organizational pressures. E This chapter summarizes our current knowledge of ethical decision making in busiN making in organizations. Although it is ness and provides insights into ethical decision impossible to describe exactly how any one N individual or work group might make ethical decisions, we can offer generalizations about average or typical behavior patterns within E on many studies and at least six ethical deciorganizations. These generalizations are based sion models that have been widely accepted by academics and practitioners.1 Based on these models, we present a framework for understanding ethical decision making in the context 2 of business organizations. In addition to business, this framework integrates concepts from philosophy, psychology, sociology, and organizational behavior. This framework should be 4 helpful in understanding organizational ethics and developing ethical programs. 7 9 T ETHICAL DECISION A FRAMEWORK FOR S BUSINESS MAKING IN As Figure 5.1 shows, our model of the ethical decision making process in business includes ethical issue intensity, individual factors, and organizational factors such as corporate culture and opportunity. All of these interrelated factors influence the evaluations of and intentions behind the decisions that produce ethical or unethical behavior. This model does not describe how to make ethical decisions, but it does help one to understand the factors and processes related to ethical decision making. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 129 Chapter 5: Ethical Decision Making and Ethical Leadership FIGURE 5.1 Framework for Understanding Ethical Decision Making in Business Ethical Issue Intensity Individual Factors Opportunity R I C A R D Ethical Issue Intensity , Ethical or Unethical Behavior The first step in ethical decision making is to recognize that an ethical issue requires an individual or work group to choose among several actions that various stakeholders inside or A outside the firm will ultimately evaluate as right or wrong. The intensity of an ethical issue Dmaker.2 Ethical issue intensity, then, can relates to its perceived importance to the decision be defined as the relevance or importance of an ethical issue in the eyes of the individual, R work group, and/or organization. It is personal and temporal in character to accommoI characteristics of the situation, and the date values, beliefs, needs, perceptions, the special 3 personal pressures prevailing at a particular place Eand time. Senior employees and those with administrative authority contribute significantly to intensity because they typically N instance, insider trading is considered dictate an organization’s stance on ethical issues. For to be a serious ethical issue by the government as Nthe intent is to take advantage of inside information not available to the public. Therefore, it is an ethical issue of high intensity E the government’s investigation of sofor regulators and government officials. Consider called “expert-network” firms. These firms try to appear as legitimate consultants, but the government believes they might be providing inside information. Technology companies 2 other innovations that will affect their that are on the verge of new products, patents, or market price are especially targeted by these consultants. However, if investigations show 4 these firms to be legitimate, it is possible that the ethical issues they have raised will not 7 turn out to be of high intensity.4 Under current law, managers can be held liable 9 for the unethical and illegal actions of subordinates. In the United States, the Federal Sentencing Guidelines for Organizations T contain a liability formula that judges use as a guideline regarding illegal activities of corS and managers who were aware of porations. For example, many of the Enron employees the firm’s use of off-balance-sheet partnerships—which turned out to be the major cause of the energy firm’s collapse—were advised that these partnerships were legal, so they did not perceive them as an ethical issue. Although such partnerships were legal at that time, the way that some Enron officials designed them and the methods they used to provide collateral (that is, Enron stock) created a scheme that brought about the collapse of the company.5 Thus, ethical issue intensity involves individuals’ cognitive state of concern about an issue, or whether or not they have knowledge that an issue is unethical, which in turn ©Cengage Learning 2013 Organizational Factors Business Ethics Evaluations and Intentions Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 130 Part 3: The Decision-Making Process indicates their involvement in making choices. The identification of ethical issues often requires the understanding of complex business relationships. Ethical issue intensity reflects the ethical sensitivity of the individual and/or work group that faces the ethical decision-making process. Research suggests that individuals are subject to six “spheres of influence” when confronted with ethical choices—the workplace, family, religion, legal system, community, and profession—and that the level of importance of each of these influences will vary depending on how important the decision maker perceives the issue to be.6 Additionally, the individual’s moral intensity increases his or her perceptiveness of potential ethical problems, which in turn reduces his or her inrelates to individuals’ perceptions of social prestention to act unethically.7 Moral intensity R sure and the harm they believe their decisions will have on others.8 All other factors in I Figure 5.1, including individual factors, organizational factors, and intentions, determine why different individuals perceive ethical C issues differently. Unless individuals in an organization share common concerns about ethical A issues, the stage is set for ethical conflict. The perception of ethical issue intensity can be influenced by management’s use of rewards and punishments, corporate policies, and R corporate values to sensitize employees. In other words, managers can affect the degree to D which employees perceive the importance of an ethical issue through positive and/or negative incentives.9 , not reach the critical awareness level if managFor some employees, ethical issues may ers fail to identify and educate employees about specific problem areas. One study found that more than a third of the unethical situations that lower and middle-level managers face come A from internal pressures and ambiguity surrounding internal organizational rules. Many employees fail to anticipate these issues beforeDthey arise.10 This lack of preparedness makes it difficult for employees to respond appropriately when they encounter an ethics issue. For R example, subprime lenders such as Countrywide Financial failed to educate brokers about the damages of misrepresenting financial Idata to help individuals secure loans. This contributed to widespread organizational misconduct. Organizations that consist of employees E with diverse values and backgrounds must therefore train them in the way the firm wants specific ethical issues handled. Identifying N the ethical issues and risks that employees might encounter is aN significant step toward developing their ability to make ethical decisions. Many ethical issues are identified by E or through general information available to a industry groups “Identifying the ethical firm. Flagging certain issues as high in ethical importance could issues and risks that trigger increases in employees’ ethical issue intensity. The per2 of an ethical issue has been found to have a ceived importance employees might encounter strong influence 4 on both employees’ ethical judgment and their is a significant step toward behavioral intention. In other words, the more likely individuals 7 are to perceive an ethical issue as important, the less likely they developing their ability to are to engage in 9questionable or unethical behavior.11 Therefore, make ethical decisions.” ethical issue intensity should be considered a key factor in the T ethical decision-making process. S Individual Factors When people need to resolve ethical issues in their daily lives, they often base their decisions on their own values and principles of right or wrong. They generally learn these values and principles through the socialization process with family members, social groups, and religion, and in their formal education. Good personal values have been Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making and Ethical Leadership 131 found to decrease unethical practices and increase positive work behavior. The moral philosophies of individuals, discussed in more detail in Chapter 6, provide principles and rules that people use to decide what is right or wrong. Values of individuals can be derived from moral philosophies to apply to daily decisions. However, values are subjective and vary a great deal across different cultures. For example, one individual might place greater importance on keeping one’s promises and commitments than another would. Values could also relate to negative rationalizations, such as “Everyone does it,” or “We have to do what it takes to get the business.”12 Research demonstrates that individuals with destructive personalities who violate basic core values can cause a work group to suffer a perforR to groups with no “bad apples.”13 The mance loss of 30 percent to 40 percent compared actions of specific individuals in scandal-plagued I financial companies such as AIG and Countrywide Financial often raise questions about those individuals’ personal character Cself-interest or in total disregard for the and integrity. They appear to operate in their own law and the interests of society. A Although an individual’s intention to engage in ethical behavior relates to individual values, organizational and social forces also R play a vital role. An individual’s attitudes as well as social norms will help create behavioral D intentions that will shape his or her decision-making process. While an individual may intend to do the right thing, organiza, tional or social forces can alter this intent. For example, an individual may intend to report the misconduct of a coworker, but when faced with the social consequences of doing so, may decide to remain complacent. In this case, social forces have overcome a person’s inA dividual values when it comes to taking appropriate action.14 At the same time, individual D ethical responsibilities in the work values have a strong influence over how people assume environment. In turn, individual decisions can be heavily dependent on company policy R and the corporate culture. I generally varies according to the profesThe way the public perceives individual ethics sion in question. Telemarketers, car salespersons, Eadvertising practitioners, stockbrokers, and real estate brokers are often perceived as having the lowest ethics. Research regardN judgment, intent, and behavior include ing individual factors that affect ethical awareness, gender, education, work experience, nationality, age, N and locus of control. Extensive research has been done regarding the link between gender and ethical decision making. The research shows that in many E aspects there are no differences between men and women, but when differences are found, women are generally more ethical than men.15 By “more ethical,” we mean that women seem to be more sensitive to ethical scenar2 on gender and intentions for fraudulent ios and less tolerant of unethical actions. In a study financial reporting, females reported higher intentions to report them than male par4 ticipants.16 As more and more women work in managerial positions, these findings may 7 become increasingly significant. Education is also a significant factor in the ethical 9 decision-making process. The important thing to remember about education is that it does not reflect experience. Work T experience is defined as the number of years in a specific job, occupation, and/or industry. S that a person has, the better he or she Generally, the more education or work experience is at ethical decision making. The type of education someone has received has little or no effect on ethics. For example, it doesn’t matter if you are a business student or a liberal arts student—you are pretty much the same in terms of ethical decision making. Current research, however, shows that students are less ethical than businesspeople, which is likely because businesspeople have been exposed to more ethically challenging situations than students.17 Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 132 Part 3: The Decision-Making Process Nationality is the legal relationship between a person and the country in which he or she is born. In the twenty-first century, nationality is being redefined by regional economic integration such as the European Union (EU). When European students are asked their nationality, they are less likely to state where they were born than where they currently live. The same thing is happening in the United States, as someone born in Florida who lives in New York might consider him- or herself to be a New Yorker. Research about nationality and ethics appears to be significant in that it affects ethical decision making; however, just how nationality affects ethics is somewhat hard to interpret.18 Because of cultural differences, it is impossible to state that ethical decision making in an organizational context will differ significantly among individualsR of different nationalities. The reality of today is that multinational companies look for businesspeople who can make decisions regardless I of nationality. Perhaps in 20 years, nationality will no longer be an issue in that the multinational individual’s culture will replaceC national status as the most significant factor in ethical decision making. A Age is another individual factor that has been researched within business ethics. Several decades ago, we believed that ageR was positively correlated with ethical decision making. In other words, the older you are, Dthe more ethical you are. However, recent research suggests that there is probably a more complex relationship between ethics and age.19 We do believe that older employees, with more experience have greater knowledge to deal with complex industry-specific ethical issues. Younger managers are far more influenced by organizational culture than are older managers.20 A Locus of control relates to individual differences in relation to a generalized belief about D events or reinforcements. In other words, how one is affected by internal versus external the concept relates to how people view themselves in relation to power. Those who beR lieve in external control (that is, externals) see themselves as going with the flow because I events in their lives are due to uncontrollable that is all they can do. They believe that the forces. They consider that what they wantE to achieve depends on luck, chance, and powerful people in their company. In addition, they believe that the probability of being able to Nefforts is low. Conversely, those who believe in control their lives by their own actions and internal control (that is, internals) believe that N they control the events in their lives by their own effort and skill, viewing themselves as masters of their destinies and trusting in their capacity to influence their environment. E Current research suggests that we still can’t be sure how significant locus of control is in terms of ethical decision making. One study that found a relationship between locus 2 of control and ethical decision making concluded that internals were positively correlated whereas externals were negatively correlated. 4 21 In other words, those who believe that their fate is in the hands of others were more ethical than those who believed that they formed 7 their own destiny. 9 Organizational Factors T S ethical choices in business situations, no one Although people can and do make individual operates in a vacuum. Indeed, research has established that in the workplace, the organization’s values often have greater influence on decisions than a person’s own values.22 Ethical choices in business are most often made jointly, in work groups and committees, or in conversations and discussions with coworkers. Employees approach ethical issues on the basis of what they have learned not only from their own backgrounds, but also from others in the organization. The outcome of this learning process depends on the strength of each person’s Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making and Ethical Leadership 133 personal values, the opportunities he or she has to behave unethically, and the exposure he or she has to others who behave ethically or unethically. An alignment between a person’s own values and the values of the organization help to create positive work attitudes and organizational outcomes. Research has further demonstrated that congruence in personal and organizational values is related to commitment, satisfaction, motivation, ethics, work stress, and anxiety.23 Although people outside the organization, such as family members and friends, also influence decision makers, an organization’s culture and structure operate through the relationships of its members to influence their ethical decisions. A corporate culture can be defined as a set of values, norms, and artifacts, including ways of solving problems that members (employees) R of an organization share. As time passes, stakeholders come to view the company or organization as a living organism with a mind I and will of its own. The Walt Disney Co., for example, requires all new employees to take a course in the traditions and history of DisneylandC and Walt Disney, including the ethical dimensions of the company. The corporate culture A at American Express stresses that employees help customers out of difficult situations whenever possible. This attitude is reinforced R who have gone above and beyond the through numerous company legends of employees call of duty to help customers. This strong tradition Dof customer loyalty might encourage an American Express employee to take unorthodox steps to help a customer who encounters a , that they can take some risks in helping problem while traveling overseas. Employees learn customers. Such strong traditions and values have become a driving force in many companies, including Starbucks, IBM, Procter & Gamble, Southwest Airlines, and Hershey Foods. A An important component of corporate, or organizational, culture is the company’s D values and norms that prescribe a wide ethical culture. Whereas corporate culture involves range of behavior for organizational members, ethical culture reflects whether the firm R also has an ethical conscience. Ethical culture is a function of many factors, including corI porate policies on ethics, top management’s leadership on ethical issues, the influence of coworkers, and the opportunity for unethical behavior. Communication is also important in E the creation of an effective ethical culture. There is a positive correlation between effective N communication and empowerment and the development of an organizational ethical cli24 can develop within individual mate. Within the organization as a whole, subclimates N departments or work groups, but they are influenced by the strength of the firm’s overall E ethical culture, as well as the function of the department and the stakeholders it serves.25 The more ethical employees perceive an organization’s culture to be, the less likely they are to make unethical decisions. “The more ethical 2 Corporate culture and ethical culture are closely associated with the idea that significant others within the organization employees perceive an 4 help determine ethical decisions within that organization. Research also organization’s culture to be, 7 indicates that the ethical values embodied in an organization’s culture are positively correlated to employees’ commitment to the 9 the less likely they are to firm and their sense that they fit into the company. These findT make unethical decisions.” ings suggest that companies should develop and promote ethical 26 S values to enhance employees’ experiences in the workplace. Those who have influence in a work group, including peers, managers, coworkers, and subordinates, are referred to as significant others. They help workers on a daily basis with unfamiliar tasks and provide advice and information in both formal and informal ways. Coworkers, for instance, can offer help in the comments they make in discussions over lunch or when the boss is away. Likewise, a manager may provide directives about certain types of activities that employees perform on the job. Indeed, an employee’s supervisor can play a Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 134 Part 3: The Decision-Making Process central role in helping employees develop and fit in socially in the workplace.27 Numerous studies conducted over the years confirm that significant others within an organization may have more impact on a worker’s decisions on a daily basis than any other factor.28 Obedience to authority is another aspect of the influence that significant others can exercise. Obedience to authority helps to explain why many employees resolve business ethics issues by simply following the directives of a superior. In organizations that emphasize respect for superiors, for example, employees may feel that they are expected to carry out orders by a supervisor even if those orders are contrary to the employees’ sense of right and wrong. Later, if the employee’s decision is judged to have been wrong, he or she is likely to Rboss told me to do it this way.” In addition, the say, “I was only carrying out orders,” or “My type of industry and the size of the organization have also been researched and found to be I relevant factors, with bigger companies more at risk for unethical activities.29 C A Opportunity Opportunity describes the conditions in anR organization that limit or permit ethical or unethical behavior. Opportunity results fromD conditions that either provide rewards, whether internal or external, or fail to erect barriers against unethical behavior. Examples of in, and personal worth generated by performing ternal rewards include feelings of goodness altruistic acts. External rewards refer to what an individual expects to receive from others in the social environment in terms of social approval, status, and esteem. A An example of a condition that fails to erect barriers against unethical behavior is a company policy that does not punish employees who accept large gifts from clients. The D absence of punishment essentially provides an opportunity for unethical behavior because R it allows individuals to engage in such behavior without fear of consequences. The prosI also create an opportunity for questionable pect of a reward for unethical behavior can decisions. For example, a salesperson who Eis given public recognition and a large bonus for making a valuable sale that he or she obtained through unethical tactics will probably N if such behavior goes against the salesperson’s be motivated to use such tactics again, even personal value system. If 10 percent of employees report observing others at the workplace N abusing drugs or alcohol and there is a failure to report and respond to this conduct, then E activities exists.30 the opportunity for others to engage in these Opportunity relates to individuals’ immediate job context—where they work, whom they work with, and the nature of the work. The immediate job context includes the motivational “carrots and sticks” that superiors2use to influence employee behavior. Pay raises, bonuses, and public recognition act as carrots, 4 or positive reinforcements, whereas demotions, firings, reprimands, and pay penalties act as sticks, or negative reinforcements. The U.S. Chamber of Commerce reports that 7 75 percent of employees steal from their workplaces, and most do so repeatedly.31 As Figure 9 5.2 shows, many office supplies, particularly smaller ones, tend to “disappear” from the workplace. Pens, pencils, and highlighters apT pear to be the most commonly pilfered items, with 81 percent of respondents to an Office Smissing most often. If there is no policy against Max survey reporting that these supplies go this practice, one concern is that employees will not learn where to draw the line and will get into the habit of taking even more expensive items for personal use. The opportunities that employees have for unethical behavior in an organization can be eliminated through formal codes, policies, and rules that are adequately enforced by management. For instance, the American Economic Association is considering new ethical guidelines to help academic economists become more transparent about their relationships with hedge funds, banks, and financial institutions. These guidelines are a Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 135 Chapter 5: Ethical Decision Making and Ethical Leadership FIGURE 5.2 Office Supplies Reported Missing Most Often Pens, Pencils, or Highlighters Paper Products Paper Clips or Binder Clips Stapler Scissors Tape Dispenser Printer Ink Binders Other 0 10 20 R I C A 30 R D , 40 50 60 70 80 90 Source: “The Truth behind Disappearing Office Supplies,” OfficeMax, May 2010, http://multivu.prnewswire.com/mnr/officemax/44541/docs/44541Report_OfficeMaxWorkplaceUncoveredSurvey.pdf (accessed January 6, 2011). response to the criticisms levied against academic economists over the consulting services A and derivative risk models that they provided to financial companies such as Lehman Brothers—services that have been partially blamed D for the U.S. financial crisis.32 Financial companies—such as banks, savings and loan associations, and securities companies—have R also developed elaborate sets of rules and procedures to avoid creating opportunities for I individual employees to manipulate or take advantage of their trusted positions. In banks, one such rule requires most employees to take a vacation and stay out of the bank a certain E number of days every year so that they cannot be physically present to cover up embezzleN the opportunity for inappropriate ment or other diversions of funds. This rule prevents conduct. N Despite the existence of rules, misconduct can still occur without proper oversight. E In Kabul, Afghanistan, a major scandal in the country’s largest bank nearly led to its ruin. Two top executives were implicated in a massive fraud, and later investigations revealed that the bank had made questionable loans that could cost it hundreds of millions of 2 banking system in Afghanistan to coldollars. Failure of the bank could cause the entire lapse. How did the bank manage to get away with 4 such a widespread fraud? Investigators believe the bank may have been paying off certain government officials for years to look 7 also include some of the country’s the other way. If this is true, the corruption would 33 must be checks and balances that create top leaders. To avoid similar situations, there 9 transparency. T Opportunity also comes from knowledge. A major type of misconduct observed among employees in the workplace is lying toS employees, customers, vendors, or the public or withholding needed information from them. 34 A person who has expertise or information about the competition has the opportunity to exploit this knowledge. An individual can be a source of information because he or she is familiar with the organization. Individuals who have been employed by one organization for many years become “gatekeepers” of its culture and often have the opportunity to make decisions related to unwritten traditions and rules. They help socialize newer employees to abide by the rules and norms of the company’s internal and external ways of doing business, as well Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 136 Part 3: The Decision-Making Process as understanding when the opportunity exists to cross the line. They may function as mentors or supervise managers in training. Like drill sergeants in the army, these trainers mold the new recruits into what the company wants. Their training can contribute to either ethical or unethical conduct. The opportunity for unethical behavior cannot be eliminated without aggressive enforcement of codes and rules. A national jewelry store chain president explained to us how he dealt with a jewelry buyer in one of his stores who had taken a bribe from a supplier. There was an explicit company policy against taking incentive payments to deal with a specific supplier. When the president of the firm learned about the accepted bribe, he imR in question and terminated his employment. mediately traveled to the office of the buyer He then traveled to the supplier (manufacturer) I selling jewelry to his stores and terminated his relationship with the firm. The message was clear: Taking a bribe is unacceptable for the C companies could cost their firm significant store’s buyers, and salespeople from supplying sales by offering bribes. This type of policyAenforcement illustrates how the opportunity to commit unethical acts can be eliminated or at least significantly reduced. R D Business Ethics Evaluations and Intentions Ethical dilemmas involve problem-solving,situations in which the rules governing decisions are often vague or in conflict. The results of an ethical decision are often uncertain; it is not always immediately clear whether or not we have made the right decision. There are no A that ethical dilemmas can be plugged into magic formulas, nor is there computer software to get a solution. Even if they mean well, most D businesspeople will make ethical mistakes. Therefore there is no substitute for critical thinking and the ability to take responsibility for R our own decisions. I decision regarding what action he or she will An individual’s intentions and the final take are the last steps in the ethical decision-making process. When the individual’s intenE tions and behavior are inconsistent with his or her ethical judgment, the person may feel N guilty. For example, when an advertising account executive is asked by her client to create an advertisement that she perceives as misleading, she has two alternatives: to comply or to N refuse. If she refuses, she stands to lose business from that client and possibly her job. Other E need to keep her job to pay her debts and livfactors—such as pressure from the client, the ing expenses, and the possibility of a raise if she develops the advertisement successfully— may influence her resolution of this ethical dilemma. Because of these other factors, she 2the advertisement even though she believes it may decide to act unethically and develop to be inaccurate. Because her actions are 4 inconsistent with her ethical judgment, she will probably feel guilty about her decision. 7 an unethical decision has occurred. The next Guilt or uneasiness is the first sign that step is changing one’s behavior to reduce 9 such feelings. This change can reflect a person’s values shifting to fit the decision or the person changing his or her decision type the T next time a similar situation occurs. Finally, one can eliminate some of the problematic situational factors by resigning one’s position. S For those who begin the value shift, the following are the usual justifications that will reduce and finally eliminate guilt: 1. 2. 3. I need the paycheck and can’t afford to quit right now. Those around me are doing it, so why shouldn’t I? They believe it’s okay. If I don’t do this, I might not be able to get a good reference from my boss or company when I leave. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making and Ethical Leadership 4. 5. This is not such a big deal, given the potential benefits. Business is business with a different set of rules. 6. If not me, someone else would do it and get rewarded. 137 The road to success depends on how the businessperson defines success. The success concept drives intentions and behavior in business either implicitly or explicitly. Money, security, family, power, wealth, and personal or group gratification are all types of success measures that people use. The list described is not comprehensive, and in the next chapter, you will understand more about how success canRbe defined. Another concept that affects behavior is the probability of rewards and punishments, an issue that will be explained I further in Chapter 6. C A USING THE ETHICAL DECISION-MAKING R FRAMEWORK TO IMPROVEDETHICAL DECISIONS , in this chapter cannot tell you if a busiThe ethical decision-making framework presented ness decision is ethical or unethical. It bears repeating that it is impossible to tell you what is right or wrong; instead, we are attempting to prepare you to make informed ethical A by telling you what to do in a specific decisions. Although this chapter does not moralize situation, it does provide an overview of typicalDdecision-making processes and factors that influence ethical decisions. The framework is not a guide for how to make decisions, R and knowledge about typical ethical but instead is intended to provide you with insights decision-making processes in business organizations. I Because it is impossible to agree on normative judgments about what is ethical, busiE ness ethics scholars developing descriptive models have instead focused on regularities in N interact in a dynamic environment to decision making and the various phenomena that produce predictable behavioral patterns. Furthermore, it is unlikely that an organization’s N ethical problems will be solved strictly by having a thorough knowledge about how ethical E involves value judgments and collecdecisions are made. By its very nature, business ethics tive agreement about acceptable patterns of behavior. We propose that gaining an understanding of typical ethical decision making in busi2 decision making could be improved. ness organizations will reveal several ways that such With more knowledge about how the decision process 4 works, you will be better prepared to analyze critical ethical dilemmas and to provide ethical leadership regardless of your role 7 should be taken from our framework in the organization. One important conclusion that is that ethical decision making within an organization 9 does not rely strictly on the personal values and morals of individuals. Knowledge of moral philosophies or values must be balT of the complexities of the dilemma anced with business knowledge and an understanding requiring a decision. For example, a manager who S embraces honesty, fairness, and equity has to understand the diverse risks associated with a complex financial instrument such as options or derivatives. Business competence must exist, along with personal accountability, in ethical decisions. Organizations take on a culture of their own, with managers and coworkers exerting a significant influence on ethical decisions. While formal codes, rules, and compliance are essential in organizations, an organization built on informal relationships is more likely to develop a high integrity corporate culture.35 Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 138 Part 3: The Decision-Making Process ©Cengage Learning 2013 THE ROLE OF LEADERSHIP IN A CORPORATE CULTURE Top managers provide a blueprint for what a firm’s corporate culture should be.36 If these leaders fail to express desired behaviors and goals, a corporate culture will evolve on its own but will still reflect the values and norms of the company. Leadership, the ability or authority to guide and direct others toward achievement of a goal, has a significant impact on ethical decision making because leaders have the power to motivate others and enforce the organization’s norms and policies as well as theirR own viewpoints. Leaders are key to influencing an organization’s corporate culture and ethical I posture. Research suggests that ethical leadership has a positive correlation to follower organizational citizenship and a negative correC lation to deviance. In other words, ethical business leaders are more likely to have employees A follow their example and less likely to have that deviants that create trouble in the company.37 R Although we often think of CEOs and other DEBATE ISSUE TAKE A STAND D managers as the most important leaders in top an , organization, the corporate governance reExamining Warren Buffett as an Effective forms discussed in Chapter 4 make it clear that Leader a firm’s board of directors is also an important leadership component. Indeed, directors have a A Warren Buffett has been the leader of Berkshire legal obligation to manage companies “for the Hathaway, Inc., for more than 40 years. Buffett has D interests of the corporation.” To determine best been viewed as an ethical leader who emphasizes what R is in the best interest of the firm, directors integrity in his manager choices. His conglomerate can consider the effects that a decision may have is one of the largest companies in the United States. I only on shareholders and employees but also not Buffett relies on the character of the CEOs of the on E other important stakeholders.38 Therefore, various companies in his conglomerate, and in when we discuss leadership, we include corpomany cases, he may only have a few conversations N rate directors as well as top executives. with the CEO over the course of a year. His trust in N In the long run, if stakeholders are not reahis associates was undermined when David Sokol, sonably satisfied with a company’s leader, he the leading contender to succeed him, resigned E she will or not retain a leadership position. A after revelations that he had purchased $10 million leader must not only have his or her followers’ in shares of a chemical maker a week before respect but must also provide a standard of ethirecommending the purchase of the company to 2 cal conduct. The former chairman of the Korean Buffett. This broke the company’s insider trading 4 electronics giant Samsung Group, Lee Kun-hee, rules and duty of candor. While Sokol’s trading may resigned in disgrace after 20 years on the Samsung 7 fall in a gray area of the law, there are certainly board after being accused of evading $128 mil39 questions about Sokol’s disclosures. 9 in taxes. His son and heir to the company, lion 1. Warren Buffett is correct in trusting those around Lee T Jae-yong, also resigned from the board. This him to have high integrity and the ability to make was only the last in a long string of corruption S ethical decisions based on their character. charges against Lee. He was also convicted of bribery 12 years ago. Since his resignation, the 2. Warren Buffett needs to focus more on company has sought to improve its image.40 Table organizational ethical codes and compliance and 5.1 summarizes the steps executives should take less on the character of the manager that he puts to demonstrate that they understand the imporin charge of the company. tance of ethics in doing business. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 139 Chapter 5: Ethical Decision Making and Ethical Leadership TABLE 5.1 The Managerial Role in Developing Ethics Program Leadership 1. Obtain organizational commitment from the board of directors and top management 2. Develop organizational resources for ethics initiatives 4. Develop an effective ethics program to address risks and maintain compliance with ethical standards 5. Provide oversight for implementation and audits of ethical programs R I C A LEADERSHIP STYLES R INFLUENCE ETHICAL DECISIONS D , Leadership styles influence many aspects of organizational behavior, including employ6. Communicate with stakeholders to establish shared commitment and values for ethical conduct ©Cengage Learning 2013 3. Determine ethical risks and develop contingency plans ees’ acceptance of and adherence to organizational norms and values. Styles that focus on building strong organizational values among employees contribute to shared standards of A conduct. They also influence the organization’s transmission and monitoring of values, D style of an organization influences norms, and codes of ethics.41 In short, the leadership how its employees act. The challenge for leaders is in gaining the trust and commitment of R organizational members, which is essential if organizational leaders are to steer their comI panies toward success. Those leaders who are recognized as trustworthy are more likely firm’s leadership styles and attitudes can to be perceived as ethical stewards.42 Studying aE also help to pinpoint where future ethical issues may arise. Even for actions that may be N against the law, employees often look to their organizational leaders to determine how to respond. N Ethical leadership by a CEO requires an understanding of his or her firm’s vision E and values, as well as of the challenges of responsibility and the risks involved in achieving organizational objectives. Lapses in ethical leadership can occur even in people who possess strong ethical character, especially if they view the organization’s ethical culture as being outside the realm of decision making that2exists in the home, family, and community. This phenomenon has been observed in countless 4 cases of so-called good community citizens engaging in unethical business activities. For example, Robin Szeliga, former CFO 7 of Qwest, who pleaded guilty for insider trading, was an excellent community leader, even serving on a business college advisory board. 9 Ethical leaders need both knowledge and experience to make decisions. Strong ethical T leaders must have the right kind of moral integrity. Such integrity must be transparent; in other words, they must “do in private as if it wereSalways public.” This type of integrity relates to values and is discussed in later chapters. Ethical leaders must be proactive and ready to leave the organization if its corporate governance system makes it impossible to make the right choice. Such right choices are complex by definition. The ethical leader must balance current issues with potential future issues. Such a person must be concerned with shareholders as well as with the lowest-paid employees. Experience shows that no leader can always be right or judged ethical by stakeholders in every case. The acknowledgment Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 140 Part 3: The Decision-Making Process of this fact may be perceived as a weakness, but in reality it supports integrity and increases the debate exchange of views on ethics and openness. Six leadership styles that are based on emotional intelligence—the ability to manage ourselves and our relationships effectively—have been identified by Daniel Goleman.43 1. The coercive leader demands instantaneous obedience and focuses on achievement, initiative, and self-control. Although this style can be very effective during times of crisis or during a turnaround, it otherwise creates a negative climate for organizational performance. 2. The authoritative leader—consideredRto be one of the most effective styles—inspires employees to follow a vision, facilitates change, and creates a strongly positive perforI mance climate. The affiliative leader values people,C their emotions, and their needs and relies on friendship and trust to promote flexibility, A innovation, and risk taking. 3. 4. 5. 6. The democratic leader relies on participation and teamwork to reach collaborative R decisions. This style focuses on communication and creates a positive climate for D achieving results. The pacesetting leader can create a negative climate because of the high standards that , he or she sets. This style works best for attaining quick results from highly motivated individuals who value achievement and take the initiative. The coaching leader builds a positiveA climate by developing skills to foster long-term success, delegating responsibility, andD skillfully issuing challenging assignments. The most successful leaders do not rely on R one style but alter their techniques based on the characteristics of the situation. Different styles can be effective in developing an ethical I of risks and the desire to achieve a positive culture depending on the leader’s assessment climate for organizational performance. E Another way to consider leadership styles is to classify them as transactional or transN formational. Transactional leaders attempt to create employee satisfaction through negotiating, or “bartering,” for desired behaviors or Nlevels of performance. Transformational leaders strive to raise employees’ level of commitment and to foster trust and motivation.44 Both E transformational and transactional leaders can positively influence the corporate culture. Transformational leaders communicate a sense of mission, stimulate new ways of thinking, and enhance as well as generate2new learning experiences. They consider employee needs and aspirations in conjunction with organizational needs. They also build 4 effective responses to ethical issues. Thus, commitment and respect for values that promote transformational leaders strive to promote7activities and behavior through a shared vision and common learning experience. As a result, they have a stronger influence on coworker 9an ethical culture than do transactional leadsupport for ethical decisions and building ers. Transformational ethical leadership is Tbest suited for organizations that have higher levels of ethical commitment among employees and strong stakeholder support for an ethical culture. A number of industry trade S associations—including the American Institute of Certified Public Accountants, Defense Industry Initiative on Business Ethics and Conduct, Ethics and Compliance Officer Association, and Mortgage Bankers Association of America—are helping companies provide transformational leadership.45 In contrast, transactional leaders focus on ensuring that required conduct and procedures are implemented. Their negotiations to achieve desired outcomes result in a dynamic relationship with subordinates in which reactions, conflict, and crisis influence Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 141 Chapter 5: Ethical Decision Making and Ethical Leadership the relationship more than ethical concerns. Transactional leaders produce employees who achieve a negotiated level of performance, including compliance with ethical and legal standards. As long as employees and leaders both find this exchange mutually rewarding, the relationship is likely to be successful. However, transactional leadership is best suited for rapidly changing situations, including those that require responses to ethical problems or issues. For example, when Eric Pillmore took over as senior vice president of corporate governance at Tyco after a major scandal involving CEO Dennis Kozlowski, the company needed transitional leadership. To turn the company around, many ethics and corporate governance decisions needed to be made quickly. The company also needed R and empowered leaders to improve cross-functional leadership, improved accountability, corporate culture. Pillmore helped install a newI ethics program that changed leadership policies and allowed him direct communications with the board in order to help impleC ment the leadership transition.46 A R HABITS OF STRONG ETHICAL LEADERS D , professor, crafted “7 Habits of Highly Archie Carroll, a University of Georgia business TABLE 5.2 Seven Habits of Strong Ethical Leaders 1. Ethical leaders have strong personal character. 2. Ethical leaders have a passion to do right. 3. Ethical leaders are proactive. 4 7 9 T S 4. Ethical leaders consider stakeholders’ interests. 5. Ethical leaders are role models for the organization’s values. 6. Ethical leaders are transparent and actively involved in organizational decision making. 7. Ethical leaders are competent managers who take a holistic view of the firm’s ethical culture. ©Cengage Learning 2013 Moral Leaders” based on the idea of Stephen Covey’s The 7 Habits of Highly Effective People.47 We have adapted Carroll’s “7 Habits of Highly Moral Leaders”48 to create our own “Seven Habits of Strong Ethical Leaders” (Table A 5.2). In particular, we believe that ethical leadership is based on holistic thinking that embraces D the complex and challenging issues that companies face on a daily basis. Ethical leaders need both knowledge and experience R to make the right decisions. Strong ethical leaders have both the courage and the most complete information to make decisions that will I be best in the long run. Strong ethical leaders must stick to their principles and, if necessary, be ready to leave the organization if E its corporate governance system is so flawed that it is impossible to make the right choice. N Bill Gates, Milton Hershey, Michael Many corporate founders—such as Sam Walton, Dell, Steve Jobs, and Ben Cohen and Jerry Greenfield—left their ethical stamp on their N companies. Their conduct set the tone, making them role models for desired conduct in the early growth of their respective corporations.EIn the case of Milton Hershey, his legacy endures, and Hershey Foods continues to be a role model for ethical corporate culture. In the case of Sam Walton, Walmart embarked on a course of rapid growth after his death 2 various stakeholder groups, especially and became involved in numerous conflicts with Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 142 Part 3: The Decision-Making Process employees, regulators, competitors, and communities. Despite the ethical foundation left by Sam Walton, Walmart, like most large corporations, deals with hundreds of reported ethical lapses every month.49 Ethical Leaders Have Strong Personal Character There is general agreement that ethical leadership is highly unlikely without a strong personal character. The question is how to teach or develop a moral person in a corporate environment. Thomas I. White, a leading authority on character development, believes the R focus should be on developing “ethical reasoning” rather than on being a “moral person.” According to White, the ability to resolveIthe complex ethical dilemmas encountered in a corporate culture requires intellectual skills.50 For example, when Lawrence S. Benjamin took over as president of U.S. Food ServiceC after a major ethical disaster, he initiated an ethics and compliance program to promote transparency and to teach employees how to make A difficult ethical choices. A fundamental problem in traditional character development is that specific values and virtues are used toR teach a belief or philosophy. This approach may be inappropriate for a business environment D where cultural diversity and privacy must be respected. On the other hand, teaching individuals who want to do the right thing regard, equipping these individuals with the intellecing corporate values and ethical codes, and tual skills to address the complexities of ethical issues, is the correct approach. A Ethical Leaders Have D a Passion to Do Right The passion to do right is the glue that holds ethical concepts together. Some leaders deR velop this trait early in life, whereas others develop it over time through experience, reason, I arguments for doing right—to keep society or spiritual growth. They often cite familiar from disintegrating, to alleviate human suffering, to advance human prosperity, to resolve E conflicts of interest fairly and logically, to praise the good and punish the guilty, or just because something “is the right thing toN do.”51 Having a passion to do right indicates a personal characteristic of recognizing theN importance of ethical behavior and having the willingness to face challenges and make tough choices. Courageous leadership requires EConsider the crisis faced by Harry Kraemer, making and defending the right decision. the CEO of Baxter International, after 53 dialysis patients died during treatment. “We have this situation,” he said. “The financial people will assess the potential financial impact. The legal people will do the same. But at the 2 end of the day, if we think it’s a problem that a Baxter product was involved in the deaths 4 of 53 people, then those other issues become pretty easy. If we don’t do the right thing, then we won’t be around to address those other 7 issues.”52 9 Ethical Leaders T Are Proactive S for ethical problems to arise. They anticipate, Ethical leaders do not hang around waiting plan, and act proactively to avoid potential ethical crises.53 One way to be proactive is to take a leadership role in developing effective programs that provide employees with guidance and support for making more ethical choices, even in the face of considerable pressure to do otherwise. Ethical leaders who are proactive understand social needs and apply or even develop the best practices of ethical leadership that exist in their industry. One of Fortune magazine’s “Best Companies to Work for” in 2011 was DreamWorks Animation, Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making and Ethical Leadership 143 which takes a proactive stance toward seeking top talent. CEO Jeffrey Katzenberg calls job candidates personally to encourage them to join the company. Additionally, DreamWorks has adopted a culture that supports employee contributions and creativity. Any employee at DreamWorks can pitch a movie idea to the top executives, and the company even sponsors workshops to help employees learn how to do so.54 Such strong leadership is crucial in maintaining impressive credentials over the long term. Ethical Leaders Consider Stakeholders’ Interests R Ethical leaders consider the interests of and implications for all stakeholders, not just those that have an economic impact on the firm. This Ilevel of oversight requires acknowledging and monitoring the concerns of all legitimate stakeholders; actively communicating and C cooperating with them; employing processes that are respectful of them; recognizing interdependencies among them; avoiding activitiesA that would harm their human rights: and recognizing the potential conflicts between leaders’ “own role as corporate stakeholders R and their legal and moral responsibilities for the interests of other stakeholders.”55 D stakeholder interests to ensure that Ethical leaders have a responsibility to balance the organization maximizes its role as a responsible , corporate citizen. For instance, while Waste Management is the largest waste management provider in the United States, it is also the nation’s largest recycler. Its environmental initiatives have earned it a spot among Ethisphere’s 2010 World’s Most Ethical Companies. AAlthough Waste Management is known for its green trucks hauling trash to the dump, CEO David Steiner is taking the company D in a more ecofriendly direction. With its tagline “Think Green,” the company has invested in about 25 businesses to capture and reuse the energy R and materials found in waste. Waste Management’s LampTracker business is also the largest recycler of compact fluorescent I zero waste practices represent a threat light bulbs in the nation. Although recycling and to traditional waste management services, WasteE Management is taking a long-term stakeholder perspective with the belief that such practices are the future of the industry.56 N N Ethical Leaders Are Role Models for the E Organization’s Values If leaders do not actively serve as role models for the organization’s core values, then those values become nothing more than lip service. 2 According to behavioral scientist Brent Smith, as role models, leaders are the primary influence on individual ethical behavior. 4 Leaders whose decisions and actions are contrary to the firm’s values send a signal that the 7 firm’s values are trivial or irrelevant.57 Firms such as Countrywide Financial articulated core values that were nothing more than window9dressing. On the other hand, when leaders model the firm’s core values at every turn, the results can be powerful. T Consider Whole Foods, the world’s largest organic and natural grocer. Ever since its S has demonstrated a commitment to soconception in Austin, Texas, in 1980, Whole Foods cial responsibility and strong core values (see Table 5.3). In addition to providing consumers with fresh, healthy foods, Whole Foods cares for its employees by creating a transparent and friendly work environment. The company encourages a sense of teamwork through imposing a salary cap for top executives. The company also works to support growers and the environment through sourcing from sustainable growers and supporting such efforts as recycling and reducing energy whenever possible. Whole Foods donates a minimum of Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 144 Part 3: The Decision-Making Process TABLE 5.3 Whole Food’s Core Values t 4FMMJOHUIFIJHIFTURVBMJUZOBUVSBMBOEPSHBOJDQSPEVDUT t 4BUJTGZJOHBOEEFMJHIUJOHPVSDVTUPNFST t 4VQQPSUJOHUFBNNFNCFSIBQQJOFTTBOEFYDFMMFODF t $SFBUJOHXFBMUIUISPVHIQSPGJUTBOEHSPXUI t $BSJOHBCPVUPVSDPNNVOJUJFTBOEPVSFOWJSPONFOU R t 1SPNPUJOHUIFIFBMUIPGPVSTUBLFIPMEFSTUISPVHIIFBMUIZFBUJOHFEVDBUJPO I C A 5 percent of profits to local communities in which it operates. Many people are drawn to R Whole Foods because of its high quality standards, educational initiatives, and close relationships with suppliers.58 D , Ethical Leaders Are Transparent and Actively Involved in Organizational Decision Making A Transparency fosters openness, the freedom to express ideas, and the ability to question D conduct. It also encourages stakeholders to learn about and comment on what a firm is doing. Transparent leaders will not be effective R unless they are personally involved in the key decisions that have ethical ramifications. Transformational leaders are collaborative, which I opens the door for transparency through interpersonal exchange. Earlier we noted that E and respect for values that provide guidance transformational leaders instill commitment on how to deal with ethical issues. Herb Baum, N former CEO of the Dial Corp., says, “In today’s business environment, if you’re a leader—or want to be—and you aren’t contributing N to a values-based business culture that encourages your entire organization to operate with integrity, your company is as vulnerable E as a baby chick in a pit of rattlesnakes.” Baum’s t $SFBUJOHPOHPJOHXJOXJOQBSUOFSTIJQTXJUIPVSTVQQMJFST Source: “Our Core Values,” Whole Foods Markets, www.wholefoodsmarket.com/company/corevalues.php (accessed March 1, 2011). three remarkably simple principles of transparency are to (1) tell the whole truth, (2) build a values-based culture, and (3) hire “people people.”59 2 Ethical Leaders Are Competent Managers Who Take 4 a Holistic View of the 7 Firm’s Ethical Culture Ethical leaders can see a holistic view of their 9 organization and therefore view ethics as a strategic component of decision making, much like marketing, information systems, proT duction, and so on. For instance, Bill Marriott of Marriott Hotels was selected as one of the S by the Ethisphere Institute in 2010. Marriott 100 Most Influential People in Business Ethics has demonstrated a commitment to social responsibility by guiding his company toward more ethical sourcing practices and working toward equal rights worldwide.60 As the business environment constantly changes, effective leaders must learn to change their strategies accordingly. Figure 5.3 shows four important trends at companies with strong leadership. Note that many of these trends, such as working from home, have only taken on significant importance in the last few years. Top leadership must have a clear Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 145 Chapter 5: Ethical Decision Making and Ethical Leadership FIGURE 5.3 Leadership Is More Challenging in Today’s Business Environment Best-in-Class Are Shifting Their Focus My Organization Uses Corporate Social Responsibility to Recruit Employees 94.8% 60.4% 66.2% We Have a High Proportion of Women in Senior Leadership 36.5% At My Company it is Easy for People to Work from Home At My Company an Appreciation of Global Issues is a Key Job Requirement 0 20 R I C46.4% A R 59.1% D 40 60 Percent , Top 20 Companies 91.4% 91.0% 80 100 All Respondents A D understanding of key social and global concernsRif they hope to lead their companies to success. Leadership continues to be one of the most important drivers of ethical conduct I in organizations. E N UNDERSTANDING ETHICAL DECISION N MAKING AND THE ROLE OF LEADERSHIP E Source: Bloomberg BusinessWeek/Hay Group 2009 Best Companies for Leadership Survey. Used with permission of Bloomberg L.P. Copyright© 2011. All rights reserved. Our ethical decision-making framework demonstrates the many factors that influence ethical decisions. Ethical issue intensity, individual factors, organizational factors, and opportunity result in business ethics evaluations2and decisions. An organizational ethical culture is shaped by effective leadership. Without4top level support for ethical behavior, the opportunity for employees to engage in their own personal approaches to ethical decision 7 making will evolve. An ethical corporate culture needs shared values along with proper oversight to monitor the complex ethical decisions 9 being made by employees. It requires the establishment of a strong ethics program to educate and develop compliance policies. T Consider Kathleen Edmond, the Chief Ethics Officer at Best Buy. Edmond, a continual S Business Ethics list, has created a culwinner of Ethisphere’s Most Influential People in ture of transparency at Best Buy. Edmond created a blog that is available to the public that discusses ethics issues, including instances of misconduct at Best Buy. Such transparency keeps the company accountable to its stakeholders. Consequently, Best Buy has also earned a spot as one of Ethisphere’s World’s Most Ethical Companies.61 On the other hand, some companies that have a strong reputation for ethical leadership sometimes fail to maintain their ethical culture. For example, Johnson and Johnson’s Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 146 Part 3: The Decision-Making Process quick action during the Tylenol murders secured its reputation for putting customer safety first. However, Johnson and Johnson has experienced several quality control issues that have put its reputation as an ethical company into jeopardy. The company underwent 50 product recalls in 15 months due to product contamination or defects. The government has accused it of not acting quickly enough in recalling products. A unit of Johnson and Johnson, DePuy Orthopedics, also recalled two types of replacement hips that had been causing pain in patients, but 93,000 of these devices had already been implanted. This has led to a string of lawsuits as well as increased government scrutiny of Johnson and Johnson plants.62 R decision making in business, the more likely Finally, the more you know about ethical you will be to make good decisions. There Iare many challenges in organizations that are beyond the control of any one individual. On the other hand, as you move to higher levels of C ethical leadership to become a role model for the organization, there is the opportunity for good ethics. The descriptive framework ofAethical decision making in this chapter should provide many insights into the relationships that can contribute to an ethical culture. R D SUMMARY , The key components of the ethical decision-making framework include ethical issue intensity, individual factors, organizational A factors, and opportunity. These factors are interrelated and influence business ethics evaluations and intentions, which result in ethiD cal or unethical behavior. R is to recognize that an ethical issue requires The first step in ethical decision making an individual or work group to choose among several actions that will ultimately be evaluI ated as ethical or unethical by various stakeholders. Ethical issue intensity is the perceived E to an individual or work group. It reflects the relevance or importance of an ethical issue ethical sensitivity of the individual or workNgroup that triggers the ethical decision-making process. Other factors in our ethical decision-making framework influence this sensitivity, N ethical issues differently. and therefore different individuals often perceive Individual factors such as gender, education, nationality, age, and locus of control can E affect the ethical decision-making process, with some factors being more important than others. Organizational factors such as an organization’s values often have greater influence on an individual’s decisions than that person’s 2 own values. In addition, decisions in business are most often made jointly, in work groups and committees, or in conversations and 4 discussions with coworkers. Corporate cultures and structures operate through the ability of individual relationships among the organization’s members to influence those mem7 bers’ ethical decisions. A corporate culture can be defined as a set of values, beliefs, goals, 9 norms, and ways of solving problems that members (employees) of an organization share. Corporate culture involves norms that prescribe T a wide range of behavior for the organization’s members. The ethical culture of an organization indicates whether it has an ethical S conscience. Significant others—including peers, managers, coworkers, and subordinates— who influence the work group have more daily impact on an employee’s decisions than any other factor in the decision-making framework. Obedience to authority may explain why many business ethics issues are resolved simply by following the directives of a superior. Ethical opportunity results from conditions that either provide rewards, whether internal or external, or limit barriers to ethical or unethical behavior. Included in opportunity Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making and Ethical Leadership 147 is a person’s immediate job context, which includes the motivational techniques superiors use to influence employee behavior. The opportunity employees have for unethical behavior in an organization can be eliminated through formal codes, policies, and rules that are adequately enforced by management. The ethical decision-making framework is not a guide for making decisions. It is intended to provide insights and knowledge about typical ethical decision-making processes in business organizations. Ethical decision making within organizations does not rely strictly on the personal values and morals of employees. Organizations have cultures of their own, which when combined with corporate governance mechanisms may signifiR cantly influence business ethics. Leadership styles and habits promote an organizational ethical climate. Leadership I styles include coercive, authoritative, affiliative, democratic, and coaching elements. TransC Transformational leaders strive for a actional leaders negotiate or barter with employees. shared vision and common learning experience.A Strong ethical leaders have a strong personal character, have a passion to do the right thing, are proactive, focus on stakeholdRvalues, make transparent decisions, and ers’ interests, are role models for the organization’s take a holistic view of the firm’s ethical culture. D , IMPORTANT TERMS FOR REVIEW ethical issue intensity education external control ethical culture opportunity transactional leader A moral intensity D nationality R internal control I significant other E immediate job context transformational leader N N E gender locus of control corporate culture obedience to authority leadership 2 4 7 9 T S Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 148 Part 3: The Decision-Making Process RESOLVING ETHICAL BUSINESS CHALLENGES* Peter had been a human resource (HR) manager for 18 years and vice president for two more years at Zyedego Corporation, a small company in New Orleans. In the last decade, there have been many changes to what potential/actual employees can be asked and what constitutes fair and equitable treatment. As a result, Peter was having trouble reconciling his individual values with what could be best for the company. Some of the human resource problems that Peter was facing also had legal implications that he would have to consider. The first issue began with Hurricane Katrina. In its wake, Zyedego employees worked around the clock to get the company up and running again. The company called all employees (if they could locate them) to get them to return to work. Gwyn, one of Peter’s HR managers, was planning on asking Dana Gonzales to return to work but found out that Dana was pregnant. Because of the rough condition of the workplace, Gwyn was concerned for Dana’s safety. Due to the extreme cutbacks the company was facing after the hurricane, Gwyn felt that the company could not afford to pay Dana for maternity leave or handle any interruptions in productivity that Dana’s pregnancy could impose. In addition, Gwyn had some concerns over Dana’s citizenship because her passport appeared to be questionable. The flooding had destroyed the original documents, and although Gwyn requested new documents, Dana was slow in providing them. Gwyn asked some difficult questions about Dana’s citizenship, and Dana stated that if she did not return to work soon, she would go to a competitor and expected the company to pay severance of two weeks’ wages for the time she was out of work during the hurricane. Another human resource issue involved the hiring of truck drivers. Zyedego hired many truck drivers and routinely requested driving records as part of the preemployment process. Several of the potential new hires had past DWI records. All stated that they would never do it again, had maintained a clean record for at least five years, and understood the consequences of another infraction. Gwyn hired some drivers with infractions to secure the necessary number of drivers needed for the company. However, Gwyn had some concerns over whether she was exposing the company to unnecessary risk because of the increased potential for accidents or repeat DWI violations. Gwyn needed guidance from Peter on the wisdom of continuing these hiring practices. RHowever, Zyedego had even deeper problems, I which was what primarily concerned Peter. The problem really started when Peter was still an Cmanager, and involves one family. Guy Martin HR started A working for Zyedego 20 years ago. At the time he was married with two children and had a R mortgage. A little over a year ago, Guy separated D his wife, and they eventually divorced, only to from remarry six months later. When Guy was hired, Pe, ter had made sure that Guy’s son, who has asthma, would be covered by health insurance. Peter also helped A out the family several times when money was tight, and provided Guy with overtime work. Dtragedy struck the Martins when Guy was killed But inR the hurricane. Police and rescue workers hunted for his body, but it was never found. Because MarI Guy’s wife, was a stay-at-home mother, their tha, only E income had been from Zyedego. The company’s death benefits would provide only 50 percent of theNdeceased’s pension for a surviving spouse. Also, because N the body had not been found, there was the legal question of death. Usually it takes seven years E before one can claim any type of insurance or deathbenefit payments, as well as medical insurance, for the family. Even with Social Security benefits, Mar2 tha would probably lose the house and could be 4 to seek employment. forced 7 Zyedego had sustained substantial losses since the hurricane. Insurance companies were extremely 9 concerning payments to all the small businesses, slow arguing T about wind versus water damage. Impeding the process of obtaining benefits was the lack of many S documents that had been destroyed in the storm. The trouble really began for Peter when he met with the insurance company about medical reimbursements, death benefits, and pension plans. Darrell Lambert was the chief adjuster for Zyedego’s insurance and pension provider. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 149 Chapter 5: Ethical Decision Making and Ethical Leadership “Here’s another case that we will not cover,” said Darrell as he flipped the file to Peter. “We can’t help the Martins for a variety of reasons. There is no body, which means no payment until after a judge declares him legally dead. That will take at least a year. While that is being settled, Mrs. Martin and her family will not be eligible for medical coverage unless Zyedego is going to pay their full amount. Finally, and I know this may sound heartless, but Mrs. Martin will only get a maximum of half of Mr. Martin’s pension.” R “But he was killed on the job!” exclaimed Peter. I “Did you require him to work that day? Did he C punch in or out? Is there any record that he was called in from Zyedego to help? The answer is no to all of the A above. He helped because he felt obligated to Zyedego. R But I am not Zyedego, and I do not have any obligation to the Martins,” Darrell said with a smile. D “Peter,” continued Darrell, “I know that Zye, dego is under intense financial pressure, but we are too. You have approximately 100 families that we will have to pay something to. You and I can spend A the next 12 months going over every case, bit by bit, D item by item, but if that’s what you want, Zyedego will go into bankruptcy. We don’t want that to hapR pen. But we also are not going to pay for everything I that you claim you are due. Our lawyers will stall the system until you go broke, and your 100 families E will get nothing. Well, maybe something in five to seven years. What I am proposing is a way for you to stay in business and for my company to reduce its financial payouts. Remember, we have hundreds of small businesses like you to deal with.” Darrell then calmly said, “My proposal is that you look over these files and reduce your total reimbursements to us by 40 percent. To help you out, I’ll start with this case [Martin’s]. You decide whether we pay out 40 percent or nothing. Tomorrow at 9:00 a.m., I want you to have 25 cases, including this one, pared down by 40 percent. If not, well, I’m sure my superiors have informed your superiors about this arrangement by now. You should be getting a call within the hour. So, I’ll see you here at 9:00,” and Darrell walked out the door. Several hours later, Peter received a phone call from upper management about the deal he was to implement to save the company. QUESTIONS | EXERCISES 1. What are the legal and ethical risks associated with the decision about hiring truck drivers at Zyedego? 2. What should Peter recommend to Gwyn about Dana’s case? 3. Do you think Peter is too emotionally attached to the Martin case to make an objective decision? *This case is strictly hypothetical; any resemblance to real persons, companies, or situations is coincidental. N CHECK YOUR EQ N E Check your EQ, or Ethics Quotient, by completing the following. Assess your performance to evaluate your overall understanding of the chapter material. 2 4 “Opportunity” describes the conditions within an organization that limit 7 or permit ethical or unethical behavior. Transactional leaders negotiate compliance and ethics. 9 The most significant influence on ethical behavior in an organization is T the opportunity to engage in (un)ethical behavior. S Obedience to authority relates to the influence of corporate culture. 1. The first step in ethical decision making is to understand the individual factors that influence the process. 2. 3. 4. 5. Yes No Yes No Yes No Yes No Yes No ANSWERS 1. No. The first step is to become more aware that an ethical issue exists and to consider its relevance to the individual or work group. 2. Yes. Opportunity results from conditions that provide rewards or fail to erect barriers against unethical behavior. 3. Yes. Transactional leaders barter or negotiate with employees. 4. No. Significant others have more impact on ethical decisions within an organization. 5. No. Obedience to authority relates to the influence of significant others and supervisors. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER 6 R I C A R D , A D R I E N N E 9 T S ©Stanislav Bokrach, Shutterstock 2 INDIVIDUAL FACTORS: 4 MORAL PHILOSOPHIES AND VALUES 7 Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER OBJECTIVES CHAPTER OUTLINE t To understand how moral philosophies and Moral Philosophy Defined values influence individual and group ethical decision making in business t To compare and contrast the teleological, R deontological, virtue, and justice perspectives of moral philosophy I C t To discuss the impact of philosophies A on business ethics t To recognize the stages of cognitive moral R D development and its shortcomings t To introduce white-collar crime as it relates , to moral philosophies, values, and corporate culture A D R AN ETHICAL DILEMMA* I One of the problems that Lael Matthews has had toE deal with in trying to climb the corporate ladder is N the glass ceiling faced by minorities and women. And now, in her current position, she must decide whichN of three managers to promote, a decision that, as her superior has informed her, could have serious E repercussions for her future. The following people are the candidates. Liz is a 34-year-old African American, divorced2 with one child, who graduated in the lower half 4 of her college class at Northwest State. She has 7 been with the company for four years and in the industry for eight years, with mediocre performance 9 ratings but a high energy level. She has had some T difficulties in managing her staff. Her child has had various medical problems, so higher pay would be S helpful. If promoted, Liz would be the first African American female manager at this level. Although Lael has known Liz only a short time, they seem to have hit it off; in fact, Lael once babysat Liz’s daughter, Janeen, in an emergency. One downside Moral Philosophies Instrumental and Intrinsic Goodness Teleology Deontology Relativist Perspective Virtue Ethics Justice Applying Moral Philosophy to Ethical Decision Making Cognitive Moral Development White-Collar Crime Individual Factors in Business Ethics to promoting Liz might be a perception that Lael is playing favorites. Roy is a 57-year-old Caucasian, married with three children, who graduated from a private university in the top half of his class. Roy has been with the company for 20 years and in the industry for 30, and he has always been a steady performer, with mostly average ratings. Roy has been passed over for promotions in the past because of his refusal to relocate, but that is no longer a problem. Roy’s energy level is average to low; however, he has produced many of the company’s top sales performers. This promotion would be his last before retirement, and many in the company feel he has earned it. In fact, one senior manager stopped Lael in the hall and said, “You know, Lael, Roy has been with us for a long time. He has done many good things for the company, sacrificing not only himself but also his family. I really hope that you can see your way to promoting him. It would be a favor to me that I wouldn’t forget.” Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 152 Part 3: The Decision-Making Process Quang Yeh, a single, 27-year-old Asian American, graduated from State University in the top 3 percent of her class and has been with the company for three years. She is known for putting in 60-hour weeks and for her meticulous management style, which has generated some criticism from her sales staff. The last area that she managed showed record increases, despite the loss of some older accounts who, for some reason, did not like dealing with Quang. Moreover, Quang sued her previous employer for discrimination and won. Lael had heard that Quang was intense and that nothing would stop her from reaching her goals. As Lael was going over some of her notes, another upper-management individual came to her office and said, “You know, Lael, Quang is engaged to my son. I’ve looked over her personnel files, and she looks very good. She looks like a rising star, which would indicate that she should be promoted as quickly as possible. I realize that you’re not in my division, but the way people get transferred, you never know. I would really like to see Quang get this promotion.” As she was considering the choices, Lael’s immediate supervisor came to her to talk about Liz. “You know, Lael, Liz is one of a very few people in the company who is both an African American woman and qualified for this position. I’ve been going over the company’s hiring and promotion figures, and it would be very advantageous for me personally and for the company to promote her. I’ve also spoken to public relations, and they believe that this would be a tremendous boost for the company.” As Lael pondered her decision, she mentally went through each candidate’s records and found that each had advantages and disadvantages. While she was considering her problem, the phone rang. It was Liz, sounding frantic. “Lael, I’m sorry to disturb you at this late hour, but I need you to come to the hospital. Janeen has been in an accident, and I don’t know who to turn to.” When Lael got to the hospital, she found that Janeen’s injuries were fairly R and that Liz would have to miss some work serious to help with the recuperation process. Lael also I realized that this accident would create a financial C for Liz, which a promotion could help solve. problem AThe next day seemed very long and was punctuated by the announcement that Roy’s son Rgetting married to the vice president’s daughter. was The Dwedding would be in June, and it sounded as though it would be a company affair. By 4:30 that , afternoon, Lael had gone through four aspirins and two antacids. Her decision was due in two days. What should she do? A QUESTIONS | EXERCISES D 1. Discuss the advantages and disadvantages Rof each candidate. 2.I What are the ethical and legal considerations Efor Lael? 3. Identify the pressures that have made her Npromotion decision an ethical and legal Nissue. 4. Discuss the implications of each decision that ELael could make. *This case is strictly hypothetical; any resemblance to real persons, companies, or situations is coincidental. 2 4 7 ost discussions of business ethics address the role of the individual in ethical decision making, and the model9we provided in Chapter 5 identifies individual moral perspectives as a central component of ethical decision making. In this T chapter, we provide a detailed description and analysis of how individuals’ backgrounds S People often use their individual moral phiand philosophies influence their decisions. M losophies to justify decisions or explain their actions. To understand how people make ethical decisions, it is useful to have a grasp of the major types of moral philosophies. In this chapter, we discuss the stages of cognitive development as they relate to these moral philosophies. We also examine white-collar crime as it relates to moral philosophies and personal values. Copyright 2011 Cengage Learning. All Rights Reserved. May not be co...
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Explanation & Answer

Attached.

OUTLINE

1. INTRODUCTION
2. BODY
3. CONCLUSION
4. REFERENCE


Running Head: BUSINESS

Ethical Leadership
Name
Institutional Affiliation
Instructor
Date

BUSINESS

2

Ethical Leadership
Question One
Ethical factors may influence the leaders in the decisions that they make within a
business establishment. The unethical behavior in the workplace is expressible as any action that
is not in conformity with the standards and code of conduct in the corporation. In most cases, the
unethical behaviors occur in the relationships between the employer and the employees. Most
organizations use codes of conducts and compliance or the employees’ characters to maintain
ethical practices in the organization (Fraedrich et al., 2013). However, not every employee can
have their best behavior in the organization. Based on the surrounding and the values of the
individual, ethical behavior undergoes reflection in the moral conduct of the individuals in the
firm. Ethical leadership is describable as the leadership that has an intrinsically direct link with
the respect of dignity, rights, and values of other people in the places of work.
The concepts that an ethical leader use are such as honesty, truth, trust, charisma,
fairness, and consideration. Therefore, it is believable that ethical behavior in the organization
finds its basis on the all-around thinking of the organization which covers the challenges and
issues that the organization faces on a daily basis. To make ethical decisions the leaders need
experience and knowledge in an establishment. According to Warren Buffet, there are seven
habits of a robust moral leader (Sims2009). The first habit an influentially moral leader should
have is a strong personal character. A person endowed with such an attribute is one who does not
waiver or change his or her stand. A person with a strong personality does not give up on the
specific goals that he or she has set. Therefore, they have the propensity to work under extreme
conditions alongside any possible manifestation of opposition and hardship.

BUSINESS

3

An ethical leader should have a habit of having the passion for doing right. This habit is
needed in the leader to have a strong character worth to be presumable by others as being moral;
this is achievable through having stable and controllable emotions. With these inclination...


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