© 2018 Cengage

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Ethics Check –

Ethics Check –

Is it legal?

Is it balanced?

How will it make me feel about myself?

© 2018 Cengage

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Ethics Quick Test –

Is the action legal?

Does it comply with our values?

If you do it, will you feel bad?

How will it look in the newspaper?

If you know it’s wrong, don’t do it.

If you’re not sure, ask.

Keep asking until you get an answer.

© 2018 Cengage

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Codes of Ethics or Conduct –

A way of establishing standards of behavior and communicating them to managers and employees.

The single most important element of an ethics and compliance program.

Virtually all major corporations have codes of conduct today.

Many have worldwide codes or standards.

Some codes of conduct are designed around stakeholders, others on conduct.

© 2018 Cengage

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Content of Codes of Conduct –

Employment practices

Employee, client, and vendor information

Public information and communications

Conflicts of interest

Relationships with vendors

Environmental issues

Ethical management practices

Political involvement

© 2018 Cengage

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Disciplining Violators of Ethics Standards –

Management must discipline violators of accepted ethical norms and standards.

One reason many question the sincerity of business with regard to codes of conduct is that many business are unwilling to discipline violators, implicitly approving their behavior.

Before disciplining anyone, the firm needs to have communicated its ethics standards clearly and convincingly.

© 2018 Cengage

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Ethics “Hotlines” and Whistle-Blowing Mechanisms

An effective ethical culture is contingent on employees having (with support of top management) a mechanism for reporting violations.

Hotlines are the most common way to report corporate fraud.

Can be telephone, web, or email-based.

© 2018 Cengage

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Business Ethics Training –

Goals of training are to learn:

the fundamentals of business ethics

to solve ethical dilemmas

to identify causes of unethical behavior

about common managerial ethical issues

whistle-blowing criteria and risks

to develop a code of ethics and execute an internal ethical audit

© 2018 Cengage

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Ethics Audits and Risk Assessments –

Ethics Audits –

Intended to carefully review such ethics initiatives as ethics programs, codes of conduct, hotlines, and ethics training programs.

Sustainability Audit –

Helps to identify sustainability issues within an organization.

Fraud Risk Assessment –

Review processes that identify and monitor conditions that may pertain to the company’s exposure to compliance/misconduct risk and to review methods for dealing with concerns.

© 2018 Cengage

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Corporate Transparency

Corporate Transparency –

A quality, characteristic, or state in which activities, processes, practices, and decisions that take place in companies become open or visible to the outside world.

The degree to which an organization:

provides public access to information.

accepts responsibility for its actions.

makes decisions more openly.

establishes incentives for leaders to uphold standards.

© 2018 Cengage

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Board of Director Leadership and Oversight –

Leadership and oversight of ethical initiatives by boards has not been a given.

The Sarbanes-Oxley Act

Companies are required to protect whistle-blowers without fear of retaliation.

It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit.

© 2018 Cengage

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Behavioral Ethics—Toward a Deeper Understanding (1 of 3)

Behavioral Ethics helps us to understand many of the behavioral processes that are taking place:

Bounded ethicality – occurs when managers and employees find that behaving ethically is difficult because of various organizational pressures.

Conformity bias – the tendency people have to take their cues for ethical behavior from their peers, rather than exercising their own, independent judgment.

Overconfidence bias –people may be more confident of their moral character than they have reason to be.

© 2018 Cengage

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Behavioral Ethics—Striving Towards a Deeper Understanding (2 of 3)

Self-serving bias – people may process information in a way that supports their preexisting beliefs & self-interest.

Framing – ethical judgments are affected by how an issue is posed; if posed as an “ethical” issue, they make more ethical decisions.

Incrementalism – a predisposition toward the “slippery slope.”

Role morality – a tendency to use different ethical standards for different roles in life.

Moral equilibrium – a tendency for people to keep an ethical scoreboard in their heads, and use this information when making future decisions, balancing decisions, and avoiding a moral “surplus.”

© 2018 Cengage

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Behavioral Ethics—Striving Towards a Deeper Understanding (3 of 3)

Ill-conceived goals – poorly set goals that encourage negative behaviors.

Motivated blindness – overlooking the questionable actions of others when it is in one’s own best interest.

Indirect blindness – one holds others less accountable for unethical behaviors when they are carried out through third parties.

The slippery slope – causes people not to notice others’ unethical behavior when it gradually occurs in small increments.

Overcoming values – the act of letting questionable behaviors pass if the outcome is good. This can occur when managers put more emphasis on results rather than on HOW the results are achieved.

© 2018 Cengage

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Moral Decisions, Managers, and Organizations

The goal of managers should be to create moral decisions, moral managers, and ultimately, moral organizations, while recognizing that what we frequently observe in business is the achievement of moral standing at only one of these levels.

The ideal is to create a moral organization that is fully populated by moral managers, making moral decisions (and practices, policies, and behaviors), but this is seldom achieved.

© 2018 Cengage

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Figure 8.8 Moral Decisions, Moral Managers, and Moral Oraganizations