Principles of ManagementDyck / Neubert

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Chapter 5Ethics

Roadmap

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Why Study Ethics?

• The emphasis on ethics is related to:– The world is changing rapidly.– Unethical decisions by managers are receiving more

attention.– Managers are moral agents.

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• The emphasis on ethics is related to:– The world is changing rapidly.– Unethical decisions by managers are receiving more

attention.– Managers are moral agents.

What Is Ethics?

• Ethics– A set of principles or moral standards that

differentiate right from wrong.• Management Ethics

– The study of moral standards and how they influencemanagers’ actions.

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• Ethics– A set of principles or moral standards that

differentiate right from wrong.• Management Ethics

– The study of moral standards and how they influencemanagers’ actions.

Components of Management Ethics

1. Sources where a manager may get their moralstandards

2. The moral-point-of-view that a manager follows3. The process a manager uses to make decisions

that are ethical4. The influence of ethics on how managers

practice the four management functions

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1. Sources where a manager may get their moralstandards

2. The moral-point-of-view that a manager follows3. The process a manager uses to make decisions

that are ethical4. The influence of ethics on how managers

practice the four management functions

Figure 5.1: Overview of Chapter 5

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Sources of Management Ethics

• Informal/Public– Work experiences, peers, managers– Ethical climate

• The informal shared perceptions of what are appropriatepractices and procedures

• Informal/private– Examples set by the behavior of immediate family

members• Family, friends, peer groups, society, and unspoken universal

human norms

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• Informal/Public– Work experiences, peers, managers– Ethical climate

• The informal shared perceptions of what are appropriatepractices and procedures

• Informal/private– Examples set by the behavior of immediate family

members• Family, friends, peer groups, society, and unspoken universal

human norms

Table 5.1: The FourTypes of Sources of Ethics

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Levels of Personal Moral Development

• Pre-conventional– What is rewarded and punished

• Self-interest: “What’s in it for me?”

• Conventional– Social norms or external standards

• By others: “What is everyone else doing?”

• Post-conventional– Universal principles established through conscience

and reason• “What are timeless truths?”

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• Pre-conventional– What is rewarded and punished

• Self-interest: “What’s in it for me?”

• Conventional– Social norms or external standards

• By others: “What is everyone else doing?”

• Post-conventional– Universal principles established through conscience

and reason• “What are timeless truths?”

Figure 5.2: IncreasingLevels of Moral Development

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What Do You Think:Does Religion Matter in Management Ethics?

• How does religious belief or lack of religiousbelief influence behavior?

• Why are there differences between ethics ofpeople who belong to the same religion?

• Should the study of management ethics includestudying religious ethics?

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• How does religious belief or lack of religiousbelief influence behavior?

• Why are there differences between ethics ofpeople who belong to the same religion?

• Should the study of management ethics includestudying religious ethics?

Mainstream Management Ethics

• Moral-Point-of-View– A framework of values used to develop internally

consistent and logically justified principles andstandards of right and wrong

• The key to studying managerial ethics is to thinkabout how a manager’s moral-point-of-view willinfluence the manager’s behavior.

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• Moral-Point-of-View– A framework of values used to develop internally

consistent and logically justified principles andstandards of right and wrong

• The key to studying managerial ethics is to thinkabout how a manager’s moral-point-of-view willinfluence the manager’s behavior.

Table 5.2: Variationsof the Golden Rule

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Mainstream Moral-Point-of-View

• Overarching Goals– To maximize productivity, efficiency, profitability, and

competitiveness,• General Rationale

– Consequentialist utilitarianism—actions that benefitthe greatest number are ethical

• Key Practices– Effective management focuses the functions of

management on promoting measurableimprovements in productivity or profits

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• Overarching Goals– To maximize productivity, efficiency, profitability, and

competitiveness,• General Rationale

– Consequentialist utilitarianism—actions that benefitthe greatest number are ethical

• Key Practices– Effective management focuses the functions of

management on promoting measurableimprovements in productivity or profits

Moral Philosophies

• Consequentialist Theory– Considers the consequences of an action in

determining what is ethical• Utilitarianism

– Holds that ethical managers strive to produce “thegreatest good for the greatest number

• Egoism– Utility of an option depends on the consequences for

the decision maker in deciding which option “benefitsme the most”

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• Consequentialist Theory– Considers the consequences of an action in

determining what is ethical• Utilitarianism

– Holds that ethical managers strive to produce “thegreatest good for the greatest number

• Egoism– Utility of an option depends on the consequences for

the decision maker in deciding which option “benefitsme the most”

Mainstream Consequentialism

• Mainstream moral-point-of-view assumptions:– What is “the greatest good.”

• Best “generic” measure of good is wealth or money– How can wealth be maximized?

• Through individualism—the greatest good for the greatestnumber (larger community) is achieved when organizationprofits are maximized by rewarding people (shareholders) forinvesting their resources into economic activity

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• Mainstream moral-point-of-view assumptions:– What is “the greatest good.”

• Best “generic” measure of good is wealth or money– How can wealth be maximized?

• Through individualism—the greatest good for the greatestnumber (larger community) is achieved when organizationprofits are maximized by rewarding people (shareholders) forinvesting their resources into economic activity

What Do You Think?Is Philanthropy Always Ethical?

• Is philanthropy more ethical if it does not benefitthe financial interests of the giver?

• Is philanthropy more ethical if comes from profitsthat were generated in a socially responsiblemanner?

• Do the “ends” (giving money to charity) justifythe “means” (whether the money was generatedin a socially responsible manner)?

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• Is philanthropy more ethical if it does not benefitthe financial interests of the giver?

• Is philanthropy more ethical if comes from profitsthat were generated in a socially responsiblemanner?

• Do the “ends” (giving money to charity) justifythe “means” (whether the money was generatedin a socially responsible manner)?

Making Ethical Decisions

• Mainstream Process:– Ethical awareness

• Recognize ethical issues that threaten or promote owner’swealth

– Ethical wisdom• Gather information and develop alternatives consistent with

facts and policies– Ethical judgment

• Make ethical choices that maximize legal profits– Ethical courage

• Implement ethical decisions that change norms

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• Mainstream Process:– Ethical awareness

• Recognize ethical issues that threaten or promote owner’swealth

– Ethical wisdom• Gather information and develop alternatives consistent with

facts and policies– Ethical judgment

• Make ethical choices that maximize legal profits– Ethical courage

• Implement ethical decisions that change norms

Figure 5.3: A PossibleStakeholder Map for Home Depot

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Management in Practice:How Do Managers Actually Make Ethical Decisions?

• General Rules-of-Thumb:1. Performance is what really counts, so make your

numbers.2. Be loyal and demonstrate that you are a team player.3. Don’t break the law.4. Don’t over-invest in ethical behavior

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• General Rules-of-Thumb:1. Performance is what really counts, so make your

numbers.2. Be loyal and demonstrate that you are a team player.3. Don’t break the law.4. Don’t over-invest in ethical behavior

Mainstream Ethical Influences on theFour Management Functions

• Planning: Goals and Responsibilities– Seek to maximize organizational profits for owners

• Organizing: Structures and Systems– Use the deterrent approach to reinforce ethical

behavior• Create formal positions devoted to ethics• Provide ethics training

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• Planning: Goals and Responsibilities– Seek to maximize organizational profits for owners

• Organizing: Structures and Systems– Use the deterrent approach to reinforce ethical

behavior• Create formal positions devoted to ethics• Provide ethics training

Mainstream Ethical Influences on theFour Management Functions (cont’d)

• Leading: Implicit and Explicit Action– Demonstrate appropriate conduct through personal

actions and interpersonal relationships• Controlling: Formal and Informal

– Control the ethical behavior of organizationalmembers• Code of ethics• Organizational culture

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• Leading: Implicit and Explicit Action– Demonstrate appropriate conduct through personal

actions and interpersonal relationships• Controlling: Formal and Informal

– Control the ethical behavior of organizationalmembers• Code of ethics• Organizational culture

Multistream Moral-Point-of-View

• Overarching Goals– To provide meaningful work– To operate sustainably– To be attentive to internal and external stakeholders– To facilitate servant leadership

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• Overarching Goals– To provide meaningful work– To operate sustainably– To be attentive to internal and external stakeholders– To facilitate servant leadership

Multistream Moral-Point-of-View

• Virtue Theory– Acting virtuously is the best “generic” way to improve

overall societal well-being.• Key Virtues

– Serving others– Fostering human development through work– Nurturing community by including all stakeholders– Balancing human and ecological concerns

(sustaincentrism)

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• Virtue Theory– Acting virtuously is the best “generic” way to improve

overall societal well-being.• Key Virtues

– Serving others– Fostering human development through work– Nurturing community by including all stakeholders– Balancing human and ecological concerns

(sustaincentrism)

Making Ethical Decisions

• Multistream Process:– Ethical awareness

• Recognize issues related to overall well-being– Ethical wisdom

• Consider alternatives by listening to others– Ethical judgment

• Evaluate information and make ethical choices that nurtureoverall well-being

– Ethical courage• Implement ethical decisions, some will be courageous

experiments

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• Multistream Process:– Ethical awareness

• Recognize issues related to overall well-being– Ethical wisdom

• Consider alternatives by listening to others– Ethical judgment

• Evaluate information and make ethical choices that nurtureoverall well-being

– Ethical courage• Implement ethical decisions, some will be courageous

experiments

Digging Deeper:Two Additional Moral-Points-of-View

Moral-Rights Viewof low-materialist, high-individualist managers

Asserts that managers should striveto maintain and protect thefundamental rights and privileges ofindividuals.

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Justice Approachof high-materialist, low–individualist managers

Involves evaluating decisions andbehaviors with regard to howbenefits and harms are distributedamong individuals and groups.

Multistream Ethical Influences on theFour Management Functions (cont’d)

• Planning: Goals and Responsibilities– Focus on both financial and multiple stakeholder

needs to avoid teleopathy• Organizing Structures and Systems

– Focus on promoting positive behavior rather than indrawing attention to unethical behavior andpunishments

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• Planning: Goals and Responsibilities– Focus on both financial and multiple stakeholder

needs to avoid teleopathy• Organizing Structures and Systems

– Focus on promoting positive behavior rather than indrawing attention to unethical behavior andpunishments

Table 5.2: Variations of the Golden Rule

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Corporate Social Responsibility

• Social Audit– A systematic analysis of the effect that an

organization is having on its stakeholders and societyas a whole.

– Four primary areas covered:• Assessing the organization’s economic responsibility – is it

profitable?• Is it meeting all its legal responsibilities?• Are its ethical responsibilities being met?• Is it contributing to the broader community?

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• Social Audit– A systematic analysis of the effect that an

organization is having on its stakeholders and societyas a whole.

– Four primary areas covered:• Assessing the organization’s economic responsibility – is it

profitable?• Is it meeting all its legal responsibilities?• Are its ethical responsibilities being met?• Is it contributing to the broader community?

Multistream Ethical Influences on theFour Management Functions (cont’d)

• Leading: Implicit and Explicit Action– Model a servant leadership style that promotes other

forms of well-being as co-equal with financial well-being

• Controlling: Formal and Informal– Develop a code of ethics that:

• Includes expectations for stakeholders• Is balanced in promoting positive behaviors and avoidance of

negative behaviors• Is the result of an inclusive process

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• Leading: Implicit and Explicit Action– Model a servant leadership style that promotes other

forms of well-being as co-equal with financial well-being

• Controlling: Formal and Informal– Develop a code of ethics that:

• Includes expectations for stakeholders• Is balanced in promoting positive behaviors and avoidance of

negative behaviors• Is the result of an inclusive process

Multistream Ethical Influences on theFour Management Functions (cont’d)

• Controlling: Formal and Informal (cont’d)– Formalize positive behavior by including it in the

organization’s calendar.– Use the informal control of an organizational culture

to reinforce:• Integrity in all actions• Commitment to satisfying customers• Ethical development of employees• Responsible leadership

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• Controlling: Formal and Informal (cont’d)– Formalize positive behavior by including it in the

organization’s calendar.– Use the informal control of an organizational culture

to reinforce:• Integrity in all actions• Commitment to satisfying customers• Ethical development of employees• Responsible leadership

Moral Points-of-Viewand Ethical Decision-Making

Mainstream MultistreamRecognize as ethical (awareness)issues those which threaten or promoteowner’s wealth

Recognize as ethical (awareness)issues those which threaten orpromote overall well-being

Gather information and developalternatives that are consistentwith facts and policies

Gather information and developalternatives that are consistent withlistening to others

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Gather information and developalternatives that are consistentwith facts and policies

Gather information and developalternatives that are consistent withlistening to others

Evaluate information and make ethicalchoices that maximizesprofit within legal bounds

Evaluate information and makeethical choices that nurture overallwell-being

Implement ethical decisions,which may require courageouslychallenging norms

Implement ethical decisions, whichoften take the form of courageousexperiments

Moral Points-of-Viewand Management Functions

Mainstream Function Multistream

Focuses on organizationalspecific responsibilities Plan

Focuses corporate socialresponsibilities

Emphasizes deterrenceof negative behavior in itsstructures and systems

OrganizeEmphasizes promotionof positive behavior

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Emphasizes deterrenceof negative behavior in itsstructures and systems

Utilizes a transactional formof leadership to evoke ethicalbehavior

LeadPromotes and modelsservant leadership

Stresses compliance toformal and informal codesand rules of behavior

ControlStresses commitment togrowth and empowerment