l-ethical behavior in organizations
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y
Its Fundamental Nature
Business ethics refers to the studyof peoples tendencies to behavein morally appropriate ways in
organizations.
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y Morals and Ethics: Whats the Difference?
In addressing a group about making key military decisions,U.S. General H. Norman Schwarzkopf once said, The truth ofthe matter is that you always know the right thing to do. The
hard part is doing it.
This notion is central to the distinction between two key
termsmoral values and ethicsthat are essential tounderstanding the nature of ethical behavior in organizations.
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Moral values (morals) are peoples fundamental beliefs
regarding what is right or wrong, good or bad.
One of the most important sources of moral values is
the religious background, beliefs, and trainingwe
receive. Although peoples moral values may differ,
several are widely accepted.For example, most people believe that being charitable to
someone in need is right whereas killing an innocent person is
wrong.
Ethics -Based on these beliefs, people are guided in ways that
influence the decisions they make and the actions in
which they engage. These standards are referred to as Ethics
Business ethics is the study of peoples tendencies to
behave in morally appropriate ways in organizations.
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Most organizational scientists acknowledge that
it is not a companys place to teach employees moral values.
After all, these come with people as they enter the workplace.
However, it is a companys responsibility to set clear
standards of behavior and to train employees in recognizingand following them. Just as organizations prescribe other
kinds of behavior that are expected in the workplace (e.g.,
when to arrive and leave), so too should they prescribe
appropriate ethical behavior (e.g., what precisely is
considered a bribe).
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Some UnEthical Organisations.
Arthur Andersen. This accounting firm was found
guilty of obstructing justice by destroying documents
related to the investigation of Enron, its client over
which it had auditing responsibility.
Enron. The bankruptcy of this former giant energy
company has been a catalyst for many of todays ethics
probes. Company officials were charged with creating
bogus partnerships that allowed managers to shift
debt off the books. This enabled officials to becomeenormously wealthy as Enrons stock soared.
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According to a survey conducted between 1994 and
2005, workers report that :
-the top managers have become more inclined to keeptheir promises,
-less inclined to engage in misconduct,
-less likely to feel pressure to be unethical, and
-perceive greater attention paid to practicing honesty
and respect for others.
At the same time, 55 percent of employees who
observe ethical misdeeds report them to organizational
authorities.
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Why Do
es Ethical Behavio
rM
atter inOrganizations?Under some circumstances, even seemingly ethical peoplebehave unethically. Pressure tomeet sales quotas, for example,have led some stockbrokers to boost their commissions by
convincing unknowing clients to make bad investments. Clearly,this is wrongon moral grounds. Although managers may beuncomfortable changing their morals, they must be concernedabout promoting ethical behavior for two sound businessreasons. First, over the long run, being ethical is profitable.
Second, being ethical satisfies many of todays legal regulations.
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Ethics and Profitability: You Can Have ThemBoth!
Too many people believe that being profitable
requires being unethical, at least sometimes. Thisproves to be untrue in the long run.
In fact, the evidence is clear that good ethics is good
business and that bad ethics is bad business.
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In recent years, companies have gone out of their way to
comply with the ethical requirements. Some of the most
prominent ones can be illustrated by examining the
response of one particular companythe large
pharmaceutical firm, GlaxoS
mithKline (GS
K).Specifically, policies were introduced that did the
following:
_Limited acceptance of entertainment and gifts by
employees_Raised standards for accurate documentation of
company performance.
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Ethics in the International Arena
Figuring out how to behave ethically isnt always easy.People in different cultures often have different ethical
standards. Consider the examples:
_In China, using pirated software is consideredacceptable.
_In Indonesia, bribing an official is considered anacceptable cost of doing business.
_ In Japan, you cannot conduct business unless you givethe other party a small gift.
_In North America, all such acts would be frownedupon and considered illegal and/or unethical.
Clearly, the implications for conducting business globally
are confusing.
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y Three Guiding Principles of Global Ethics
Show Respect for Core Human Values.
To be ethical, company officials must use their moralcompasses to guide people toward acceptable practices
and away from intolerable ones.
For example, taking steps to promote a healthy workplace,one that is free from physical danger and psychologicalabuse, is ethically appropriate. At the same time,
companies should refuse to do business with suppliers,such as those in the garment industry, who usesweatshops.
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Demo
nstrateS
ensitivity to
Lo
cal Traditio
ns.
Being ethical requires following local traditions, so longas these dont violate core human values, of course. As a
case in point, co
nsider the practiceo
f gift-giving amo
ngbusiness partners in Japan.
Such acts are not meant to be bribes. Rather, the act ofgiving small gifts is a customary ritual that connotespoliteness and trust between the parties. To not accept a
gift from a business partner would be consideredhighly impolite and insulting. These days, becauseAmerican companies conduct so much business in Japan,officials are coming to accept this practice as acceptable.
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Recognize that Context Matters when
Distinguishing Between Right and Wrong.
Sometimes whats right in one context may be considered
wrong in another. In the UnitedS
tates, fo
r example, itwould be considered unethical (and potentially illegal)to hire ones own relatives instead of a more qualifiednonfamily member. By contrast, conditions in India aresuch that such a practice makes sense. Indians believe
that keeping the family together is more important thanpursuing economic opportunities.
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yComponents of Corporate EthicsProgramsTypically, corporate ethics programs consist of some
combination of the following components:
Code of Ethics A code of ethics is a documentdescribing what an organization stands for and thegeneral rules of conduct expected of employees (e.g.,to avoid conflicts of interest, to be honest, and so on).
Some codes are highly specific, stating, for example,the maximum size of gifts that can be accepted,whereas others are far more general.
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y
Ethics TrainingCodes of ethics are especiallyeffective when they are used in conjunction withtraining programs that reinforce the companysethical values. About 68% of companies that havecodes of ethics provide training on the requirementsand responsibilities they specify. Citicorp, forexample, has trained more than 40,000 employees inover 60 countries using an elaborate corporate ethicsgame, The Work Ethic, that simulates ethical
dilemmas that employees are likely to confront.
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y Bodies Formally Responsible for Ethics
These are groups of senior-level managers from various areasof the organization who assist an organizations CEO in makingethical decisions. Members of the committee develop andevaluate company-wide ethics policies.Ethics officer:
A high-ranking organizational official who is expected toprovide strategies for ensuring ethical conduct throughout anorganization.
y AMechanism for Communicating Ethical Standards. To
be effective, ethics programs must clearly articulateandreinforcea companys ethical expectations to employees.ethics hotlines (or helplines), special phone lines that
employees can call to ask questions about ethical behavior andto report any ethical misdeeds they may have observed.
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y Ethics AuditsJust as companies regularly audittheir books, they regularly should assess themorality of their employees behavior so as toidentify irregularities. Such assessments are
known as ethics audits.These require actively investigating anddocumenting incidents of dubious ethical value,discussing them in an open and honest fashion,
and developing a concrete plan to avoid suchactions in the future.