Recognize an Unethical Organization

July 18th, 2008

Organizational leaders who want to develop and maintain and employees who wish to be a part of an ethical organization have to be aware of the organization’s ethical character (or culture). Employees can be as aware of the ethical character of a current or potential employer as they can of its economic health. For example, if an organization emphasizes short-term revenues over long-term results, it may be creating an unethical atmosphere. If an organization links its ethical behavior to a code of ethics but will not address the complexity of ethical dilemmas, then the code may merely be window dressing. Proactive organizations approach establishing a Code of Ethics as more than adopting a document. Some organizations establish board-level committees to monitor the ethical behavior of the organization. Ethics training programs in corporations also demonstrate a commitment to ethics in the workplace. However, such training initiatives should be proactive rather than reactive, as has been the case for many organizations to teach ethics in the post-Enron business world. [10]

An organization that encourages unethical behavior or discourages ethical behavior because of the financial implications will not be where you want to work. Ethical problems are not legal problems. An organization that fails to realize that distinction is at risk, as is one that only sees ethical problems as a public relations issue.

The treatment of employees can indicate the ethical nature of an organization. If employees are not treated as well as customers or if performance-appraisal standards are unfair or arbitrary, the company may be unethical. Additionally, an absence of procedures for handling ethical issues, the lack of a whistle-blowing mechanism, or even the lack of a basic communication avenue between employees and supervisors can indicate an organization that is ethically at risk. Finally, an organization that fails to recognize its obligations to the public as well as to its shareholders and expects you to leave your private ethics at home is an organization at risk for unethical behavior. [11]

[10]Jonathan D. Salant, “After Enron, More Firms Teach Ethics,” Virginia Daily Press (November 3, 2002), El, E3.

[11]Robert A. Cooke, “Danger Signs of Unethical Behavior: How to Determine If Your Firm Is at Ethical Risk,” Journal of Business Ethics 10 (1991), 249-53.

taken from;  Ethics and Corporate Social Responsibilty: Why Giants Fall

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Provide a Forum for Dialogue and Good Moral Conversation

July 17th, 2008

Providing a forum for dialogue is one of the most proactive gestures organizations can use to return ethics consciousness to the workplace. Dialogue encourages give-and-take and provides organization-sponsored opportunities for employees to discuss ethical expectations, individual and organizational actions, and ethically charged situations or gray areas. Dialogue leads to good moral conversation that in the long run promotes deeper commitment to the ethical employee-employer relationships or contracts and ethical practices in an organization.

Dialogue is good conversation and serves many purposes. It facilitates self-awareness and awareness of others. It is a source of learning. It is liberating, ensures that there is room for all voices, and lends itself to the creation of psychological safety, which opens the door for good moral conversations between different levels of employees in the organization.

Good conversation is a way for employees to develop “clear and compelling ethical views or positions” in and out of the workplace. Good conversation can have three main effects. First, it can legitimize ethical concern as an important dimension of life. Second, it is one way an employee can seek guidance and gain clarity about what to do in a particular situation. Finally, it is out of public discussion and agreement that feelings of ethical obligation ultimately arise. Thus, the essence of learning about and living within ethical boundaries in an organization is to be in dialogue with coworkers about the ethical rules of the road.

The primary purpose of engaging in moral conversation in organization’s is to test, expand, enrich, and deepen employees’ understanding of business ethics so that each employee can better apply principles, rules, virtues, structures, moral ideals, and background beliefs to problems encountered in business.

taken from;  Ethics and Corporate Social Responsibilty: Why Giants Fall

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Create a Climate for Whistle-Blowing

July 16th, 2008

Creating a culture where whistle-blowing is encouraged and whistle-blowers are safe is important to returning ethics consciousness to the workplace. This means that the organization:

  1. Takes the time to manage whistle-blowing by communicating the conditions appropriate for the disclosure of wrongdoing.

  2. Clearly delineates wrongful behavior and the appropriate ways to respond or disclose wrongdoing.

  3. Recognizes that to silence a whistle-blower or to muzzle a watchdog is very likely to result in further compounding problems.

  4. Creates a culture in which employees feel safe annd don’t have to conceal and distort information.

  5. Takes employees’ complaints and whistle-blowers’ information seriously.

  6. Sets up channels and other mechanisms that not only allow but also promote healthy, open communication.

  7. Conducts organizational audits or assessment to look at existing ethical standards (e.g., level of commitment from top management, the nature of training programs, communication tools such as help and hot lines, and the magnitude of organizational risks in matters ranging from internal harassment to product safety).

  8. Integrates standards and ethical values into everything from hiring to firing—training, compensation, and so on.

Whistle-blowers should be perceived as heroes. Managers have a responsibility to listen and respond to their employees, especially regarding observations of and reporting of illegal and immoral acts. Mechanisms such as “ethics offices” are part of an organization’s responsibility to provide due process for employees to report personal grievances, to obtain effective and just resolution of them, and to report the wrongdoings of others, including the employers.

taken from;  Ethics and Corporate Social Responsibilty: Why Giants Fall

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Returning Ethics Consciousness to the Workplace

July 15th, 2008

Today’s organizations must be committed to returning ethics consciousness to the workplace. As suggested throughout this book, organizational leaders can do this by changing the organization’s culture, creating a climate for whistle-blowing, and providing a forum for dialogue and good moral conversation.

As highlighted in our discussion of Warren Buffett’s tenure at the helm of Salomon Brothers in the early 1990s, ethical turnaround begin with ethical leadership. Returning ethics consciousness to the workplace ultimately means that organizational leaders reinforce an ethical culture. The five most important elements in changing and reinforcing an ethical culture are (1) what leaders pay attention to, (2) how leaders react to crises, (3) how leaders behave, (4) how leaders allocate rewards, and (5) how leaders hire and fire individuals.

Attention. Leaders in an organization communicate their priorities, values, and beliefs through the themes that consistently emerge from what they focus on. These themes are reflected in what they notice, comment on, measure, and control. If leaders are consistent in what they pay attention to, measure, and control, employees receive clear signals about what is important in the organization. If, however, leaders are inconsistent, employees spend a lot of time trying to decipher and find meaning in the inconsistent signals. Returning ethics consciousness to the workplace means that leaders focus attention on improving the ethical fiber of the organization by not disregarding the long-term implications of employee’s actions in favor of the most recent bottom line profits.

Reaction to Crises. The way leaders deal with crises communicates a powerful message about culture. Returning ethics consciousness to the workplace means that leaders swiftly react to any ethical crisis facing the organization by complying with authorities and firing ethical wrongdoers. The organization’s leaders must not lie or cover up ethical and legal transgressions and must avoid preserving ethical wrongdoers at any cost.

Role Modeling. Through role modeling, teaching, and coaching, leaders can reinforce values that support an ethical organizational culture. Employees often emulate leaders’ behavior and look to the leaders for cues to the appropriate behavior. Returning ethics consciousness to the workplace will occur when leaders convey the image of the moral manager. This means that leaders proactively set the example of honesty and integrity for the rest of the organization.

Allocation of Rewards. To ensure that values are accepted, leaders must reward behavior that is consistent with values and doing the right thing. Using rewards and discipline effectively may be the most powerful way for leaders to send signals about desirable and undesirable conduct. Returning ethics consciousness to the workplace means that those who accomplish their goals by behaving in ways consistent with stated values are rewarded and that a lack of commitment to ethical principles will ensure that employees will not be promoted.

Criteria for Selection and Dismissal. Powerful ways that leaders reinforce culture is through the selection of newcomers to the organization and the way it fires employees and the rationale behind the firing. Organizations must have clear policies on the criteria for selection and dismissal that employees understand. Reprimanding an employee who displays unethical behavior that is against the organization may be viewed as a failure to reinforce the values within the organization. Returning ethics consciousness to the workplace means that leaders must bring into the organization only employees who are committed to ethical principles and usher out all employees connected to ethical misconduct.

taken from;  Ethics and Corporate Social Responsibilty: Why Giants Fall

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Establishing a Culture of Doing the Ethical Right Thing

July 14th, 2008

To foster change and encourage individuals to act responsibly, good leadership and an ethically oriented culture are essential. Good leaders provide employees with a role model for their own behavior and keep the company grounded. But good leadership is not enough. Employees at all levels must be committed to ethical behavior. Businesses need managers who can embrace and strengthen the corporate culture of diligence and responsibility. There must be a cadre of people in any large-scale organization who have been trained not only in the language of business, but also in the language of ethics. This is where business schools can play a part.

While many MBA programs offer ethics curricula, few infuse an ethics focus into the core program. Most offer a stand-alone elective course, and recent research published in The Journal for Education in Business suggests that students retain relatively little of the content of these singleton courses. A more effective model is beginning to take hold, one that combines case studies of both applied and theoretical ethics, as well as an interdisciplinary focus throughout the MBA program, where ethics is taught as integral to all the courses a student takes. The pedagogy in these programs is moving toward teaching the lesson that good work, right action, and profitability are inextricably intertwined.

How can businesspeople be trained to choose ethical action? To choose well for themselves and for their companies? Business leaders hold the key to reform. Ethical action springs from virtue and ethical consciousness; virtue and ethical consciousness are learned from work done well; and good work is born in a supportive atmosphere. Therefore, the leader of any business must establish an organizational culture that encourages people to understand the core values of the company, to focus on creating a quality product and providing quality service, and to do their jobs better. Only in such an environment will individuals choose to act rightly and ethically, and only then will the business thrive.

This kind of visionary, disciplined leadership is rare anywhere, but it is particularly rare in the business world, where the raison d’être is often the external good of profit. Business is designed around a transactional model where leaders reward followers for work well done: you do your job, you get your paycheck; you do your job really well, you get your bonus. But this cannot be the only incentive for performing well and striving to improve. The motivation to provide the best products and services for customers, while adhering to the highest ethical standards, must be internally propelled.

Enron is a case in point. An outward model of social responsibility, Enron appeared to be environmentally responsible and community-minded, sponsoring numerous philanthropic projects in the Houston area. Beneath the veneer, however, Enron’s culture was anything but responsible. Unethical leadership produced a culture of unethical behavior where cleverness trumped character. Former employees testified on Capitol Hill about a culture that rewarded unchecked ambition, where nothing but profits mattered, where higher profit demands forced employees to lie and encouraged accountants to cut corners. In this environment, added value was all that mattered, and employees were forced to stretch the rules further and further. Ultimately, employees responded to the climate established by their leaders, and that climate left no room for ethical behavior.

The culture of an organization need not, however, focus solely on transactional relationships. Instead, leaders can establish an environment where leaders and followers raise each other to higher levels of motivation and morality. In his seminal book, Leadership, James MacGregor Burns suggests that leadership induces followers “to act for certain goals that represent the values and the motivations—the wants and needs, the aspirations and expectations—of both leaders and followers.” [1] He calls this kind of leadership “transforming” because it “raises the level of human conduct and ethical aspirations of both leader and led, and thus it has a transforming effect on both.” With good leadership and inspired followers, companies can nurture ethical behavior and doing the right thing and move the organization forward.

How can we create such a culture, and once having created it, maintain it?

[1]James MacGregor Burns, Leadership (New York: Harper & Row, 1978), 380.

taken from;  Ethics and Corporate Social Responsibilty: Why Giants Fall

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Ethical Standards and the Employee’s Dilemma

July 11th, 2008

An independent set of standards does not exist for ethical behavior in organizations. Ethics for organizations derive from the ethics of the society within which they exist. Thus, societal standards are the ultimate guide for employees. When employees confront an ethically difficult decision, they should consider how societal standards apply to their situation and should try to incorporate the most relevant ones within their moral reasoning.

Employees can look at several theories to guide their decision making. Utilitarian theory concentrates on the social consequences that an action is likely to produce. An action is considered morally right if its consequences for everyone affected by the action are greater than those which would be realized by a different action. Labor unions often negotiate across-the-board pay raises for the employees that they represent. Everyone gets the same pay increase in such situations, even though some employees perform at higher levels than others, and perhaps deserve a larger pay increase. Unions resist this notion, because they believe they can maximize the total return to all members by focusing on the size of the increase for everyone, not just for a few. In rights theory, decision makers are concerned with respecting the rights to which people are entitled—these may be legal rights or moral rights. In the United States, these rights include the right of free consent, the right to privacy, the right to freedom of conscience, the right to free speech, and the right to due process. Organizational leaders operating under a rights theory would not prohibit its employees from speaking in favor of a gay rights bill, endorsing gay partner benefits, or participating in a same-sex marriage.

Organizations that subscribe to the theory of justice emphasize engaging in acts that are fair and impartial. They would not consider a managerial action as just if it benefited some, while resulting in an injustice to others. Managers operating under a theory of justice try to prevent their direct reports from feeling cheated. For example, they make their expectations for performance clear to everyone, and then reward most of those employees who have met or exceeded those expectations. Everyone may not get a large pay increase, but they understand how the pay increases were determined. This is often referred to as procedural justice.

The suggestion that employees should consider the social consequences, the rights of others, and other ethical standards when making decisions sounds reasonable; however, doing so will not prevent individuals from encountering ethical dilemmas from time to time. Consider, for example, the dilemma posed by new scientific developments. In one recent case, the Environmental Protection Agency (EPA) caused public controversy by announcing that it would allow BioTechnica International, Inc., to test genetically altered organisms on a Wisconsin farm. [27]

[27]J. Wilke, “BioTechnica to Get OK to Test Genetically Altered Bacteria,” Boston Globe (May 7, 1987), 61.

taken form; Ethics and Corporate Social Responsibilty: Why Giants Fall

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Myths About Business Ethics

July 10th, 2008

Not everyone agrees that ethics is a relevant or necessary subject for business dealings or education. [17] Some have argued that business ethics is an oxymoron, or a contradiction in terms. While we do not advocate or promote a particular ethical position or belief system in this book, we do see that ethics is relevant to business transactions.

Over the years, lack of involvement by organizational leaders and managers in the field of business ethics has spawned a great deal of confusion and misunderstanding among them about business ethics. Often when someone brings up the topic of business ethics “it tends to bring up cynicism, righteousness, paranoia, and laughter.” [18] Many leaders and managers believe business ethics is religion because it seems to contain a great deal of preaching.

Certain myths persist about business ethics. Some of these myths arise from general confusion about the notion of ethics. Other myths arise from narrow or simplistic views of ethical dilemmas. A myth “is a belief given uncritical acceptance by members of a group, especially in support of existing or traditional practices and institutions.” [19]

  1. Ethics is personal. This myth holds that individual ethics is based on personal or religious beliefs and that one decides what is right and wrong in the privacy of one’s own conscience.

  2. Business ethics and ethics do not mix. This popular myth holds that business practices are basically amoral (not necessarily immoral), since businesses operate in a free market. [20] This myth also asserts that management is based on scientific, rather than religious or ethical, principles.

  3. Business ethics is more a matter of religion than management. A cornerstone of this myth is the belief that “altering people’s values or souls isn’t the aim of an organizational ethics program—managing values and conflict among them is.” [21]

  4. Business ethics is relative. This myth holds that no right or wrong way of believing or acting exists. Right and wrong are in the eye of the beholder.

  5. Good business means good ethics. The reasoning here is that executives and organizations that maintain a good corporate image, practice fair and equitable dealing with customers and employees, and earn profits by legitimate means are de facto ethical. [22] Such organizations, therefore, would not have to be concerned explicitly with ethics in the workplace. Just do a hard, fair day’s work, which has its own moral goodness and rewards.

  6. Information is neutral and amoral. This myth holds that information and computing are neither moral nor immoral, but amoral, that is, they are in a “gray zone,” a questionable area regarding ethics.

  7. Business ethics is still a fad or a discipline touted by philosophers, academics, and theologians. Many believe that business ethics is a fad or movement, having little to do with the day-today realities of running an organization. They believe business ethics is primarily a complex philosophical debate or a religion.

  8. Business ethics is superfluous—it only asserts the obvious: “Do good!” Those who support this myth react that codes of ethics or lists of ethical values to which the organization aspires are rather superfluous because they represent values to which everyone should naturally aspire.

  9. Business ethics is a matter of the good guys preaching to the bad guys. Some claim a moral high ground while lamenting the poor condition of business and its leaders. However, those people well versed in managing organizations realize that good people can take bad actions, particularly when stressed or confused.

  10. Ethics can’t be managed. Some are still skeptical about business ethics, believing you can’t manage values in an organization.

Logical problems occur in all of these myths. In many instances, the myths hold simplistic and even unrealistic notions about ethics in business dealings. While these myths can be refuted, they persist in the minds of many who will never believe that ethics is relevant or necessary to business dealings or education.

[17]Johannes Brinkmann and Ronald R. Sims, “Stakeholder-Sensitive Business Ethics Teaching,” Teaching Business Ethics 5, no. 2 (2001), 171-93.

[18]G. McDonald and R. Zepp, “What Should Be Done? A Practical Approach to Business Ethics,” Management Decision 28, no. 1 (1990), 9–13.

[19]Weiss, Business Ethics, 15.

[20]DeGeorge, Business Ethics.

[21]D. E. Kirrane, “Managing Values: A Systematic Approach to Business Ethics,” Training and Development Journal (November 1990), 53–60.

[22]C. D. Stone, Where the Law Ends (New York: Harper, 1975).

taken from; Ethics and Corporate Social Responsibilty: Why Giants Fall

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Operational Levels of Business Ethics

July 9th, 2008

As ethical problems are not only an individual or personal matter, it is useful to see the different levels at which issues originate and how they often move to other levels. Since today’s business leaders must manage a wide range of stakeholders inside and outside their organizations, understanding the levels of issues that stakeholders face facilitates our understanding of the complex relationships within and among those addressing ethical problems.

Ethical and moral issues in business can be examined from several levels: individual or personal, organizational, industry, societal, and international. [4]

Individual Level

We all experience ethical challenges at the individual or personal level. These include situations we face in our personal lives that are generally outside the work context. Questions or dilemmas that we might face at the personal level include:

  • Should I tell the cashier that he gave me change for a $20 bill when I gave him a $10 bill?
  • Should I notify my bank that it credited someone else’s $100 to my checking account?
  • Should I cheat on my income tax return by inflating my charitable contributions?
  • Should I return the extra merchandise that a store accidentally sent me?

If an ethical issue involves or is limited to an individual’s responsibilities, that person may examine her or his own ethical motives and standards before choosing a course of action.

Organizational Level

People also confront ethical issues at the organizational level in their roles as managers or employees. Certainly, many of these issues are similar to those we face personally. However, these issues may carry consequences for the company’s reputation and success in the community and also for the kind of ethical climate or culture that will prevail on a day-to-day basis at the office. Issues posed at the organizational level might include:

  • Should I overlook the wrongdoings of my peers and direct reports in the interest of company harmony?
  • Should I perform an unethical or illegal act to earn a division or work-unit profit?
  • Should I offer a kickback to ensure I get the client’s business to meet my sales quota?
  • Should I make this product safer than required by law, because I know the legal standard is grossly inadequate?
  • Should I accept this gift or bribe that is being given to me to close a big deal for the company?

If an ethical issue arises at the organizational level, the organizational members should examine the company’s policies and procedures and code of ethics, if one, exists before making a decision or taking action. Read the rest of this entry »

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What is Business Ethics?

July 8th, 2008

Almost every year, it seems, some major corporation is enveloped in an ethics scandal that generates a new tremor of public distrust of large corporations. [1] As a result of these never-ending scandals, the word “ethics” is often a major part of the news. Ethics is a philosophical term derived from the Greek word “ethos,” meaning character or custom. This definition is germane to effective leadership in organizations in that it connotes an organization code conveying moral integrity and consistent values in service to the public. History shows us that certain organizations will commit themselves to a philosophy in a formal pronouncement of a Code of Ethics or Standards of Conduct. Once written, the recorded idealism is distributed or shelved, and all too often that is that. Other organizations, however, are increasingly concerned with aspects of ethics of greater specificity, usefulness, and consistency.

Ethical behavior is that which isaccepted as morally “good” and “right” as opposed to “bad” or “wrong” in a particular setting. For the individual that means acting in ways consistent with one’s personal values and the commonly held values of the organization and society. Is it ethical, for example, to pay a bribe to obtain a business contract in a foreign country? Is it ethical to allow your company to withhold information that might discourage a job candidate from joining your organization? Is it ethical to ask someone to take a job you know will not be good for their career progress? Is it ethical to do personal business on company time?

The point of asking is to remind organizations that the public-at-large is demanding that government officials, business leaders and managers, workers in general, and the organizations they represent all act according to high ethical and moral standards. There is every indication that the future will bring a renewed concern with maintaining high standards of ethical behavior in organizational transactions and in the workplace.

To understand business ethics, it is useful to comment on the relationship between ethics and morality. Ethics is the discipline that deals with what is good and bad and with moral duty and obligation. Ethics can also be regarded as a set of moral principles or values. Morality is a system or doctrine of moral conduct. Moral conduct refers to that which relates to principles of right and wrong in behavior. We can think of ethics and morality as being so similar that we may use the terms interchangeably to refer to the study of fairness, justice, and right and wrong behavior in business.

Business ethics, therefore, is concerned with good and bad or right and wrong behavior and practices within a business context. Concepts of right and wrong are increasingly being interpreted to include the more difficult and subtle questions of fairness, justice, and equity. Read the rest of this entry »

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Today’s Organization and Stakeholders

July 7th, 2008

Today’s modern organization in many instances is the institutional centerpiece of a complex society made up of many people with a multitude of interests and with many expectations as to what organizations ought to provide. As highlighted in this book, the social contract between organizations and various stakeholders (e.g., employers and employees) has continually changed, producing new demands that all parties rethink their relationships. Those organizations likely to survive in the future will pay particular attention to how to successfully respond to ever-changing expectations. These organizations will need to meet many legal, ethical, and social or philanthropic expectations while still being able to change proactively in response to economic incentives.

Ethical and socially responsible employee behavior is important to the viability of all organizations as they attempt to change and respond to stakeholder expectations. “Doing what’s right” matters to organizations, related stakeholders, and the public-at-large. To organizations and employees, acting ethically and legally means saving billions of dollars each year in theft, lawsuits, and settlements. Research has shown that corporations also have paid significant financial penalties for acting unethically. Carnival Cruise Lines realized that illegally dumping wastes from its ships into the world’s waterways wasn’t worth the $18 million fine it recently paid. The tobacco industry discovered that lying about nicotine could be costly to business. Dow Corning paid heavy penalties for manufacturing and selling unsafe products, and Arthur Andersen has not recovered from its shredding of documents involved with the Enron debacle.

It has been estimated that workplace theft costs U.S. businesses $40 billion each year. In particular, some have found that employees accounted for a higher percentage of retail thefts than did customers; it has been estimated that one in every fifteen employees steals from his or her employer. Costs to businesses also include ineffective information flow throughout the organization; deterioration of relationships; declining productivity, creativity, and loyalty; and absenteeism. Organizations that have a reputation for unethical and uncaring behavior toward employees also have a difficult time recruiting and retaining valued professionals.

Today’s organizations must be responsive to an increasingly diverse audience, made up of individuals and groups that they may have been able to ignore in the past. The growing importance of the role of stakeholders in the organizational equation over the past few decades has made it apparent that organizations must address the legitimate needs and expectations of stakeholders if they want to be successful in the long run. “Stakeholder inclusion” is the key to company success in the twenty-first century. Today’s businesses must continuously address stakeholders; it is the ethical course of action to take, and stakeholders clearly have claims, rights, and expectations that should be honored. A stakeholder approach to understanding organizational situations like the Enron debacle can help us to understand better why such ethical organizational demises occur.

Organizational management that truly cares about business and corporate social responsibility is proactive rather than reactive in linking strategic action and ethics. It steers away from ethically and morally questionable business opportunities and business practices. It goes to considerable lengths to ensure that its actions reflect integrity and high ethical standards such as Warren Buffett attempted to introduce in Salomon Brothers following its ethical fall. If an organization’s stakeholders conclude that management is not measuring up to ethical standards, they have recourse. For example, concerned investors can protest at the annual shareholders’ meeting, appeal to the board of directors, or sell their stock. Concerned employees can unionize and bargain collectively, or they can seek employment elsewhere. Customers can switch to competitors. Suppliers can find other buyers. The community and society can do anything from staging protest marches and urging boycotts to stimulating political and governmental action.

taken from; Ethics and Corporate Social Responsibilty: Why Giants Fall

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