Business Ethics Exam 1 CH 1-5 – Flashcards
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Direct Causes of the 2008 Financial Disaster
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shadow financial market, subprime mortgages, regulatory climate, incentives
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Contributing Factors of the 2008 Financial Disaster
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herd mentality, investment banks, lots of cheap $$, rating agencies, innovation
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Edelman Trust Barometer (2009):
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More than half of respondents say they trust business less than a year ago
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Busines Ethics
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the principles, norms, and standards of conduct governing an individual or group
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Why bother teaching ethics
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bad apples are encouraged by bad barrels, good character isn't always enough, adults develop moral judgment into their 30s, conduct is influenced by environment
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Process of individual ethical decision making behavior
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Moral Awareness =; Ethical Judgment =; Ethical Behavior
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Why Be Ethical? Who Cares?
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individuals, employees, managers, executives, industries, societies
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perscriptive approaches
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Focus on consequences (consequentialist theories) Focus on duties, obligations, principles (deontological theories) Focus on integrity (virtue ethics)
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ethical dilemma
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a situation where values are in conflict
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consequential theories
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action that produces the greatest good for the greatest number of people for society overall
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deontological theories
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decisions based upon abstract universal principles: honesty, promise-keeping, fairness, rights, justice, respect, focus on whats right
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Virtue Ethics
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focus on integrity of moral actor rather than the act, considers character, motivations, intentions, character defined by ones community
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the relationship between ethical awareness, judgment, and action
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ethical awareness=; Ethical Judgment =; Ethical Action
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influences on ethical awareness
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if - peers agree, ethical language is used, potential for serious harm is recognized
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preconventional cognitive moral development
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Level 1 stage 1 - obedience and punishment orientation, stage 2 - instrumental purpose and exchange
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conventional cognitive moral development
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Level 2 stage 3 - interpersonal accord - conformity - mutual expectations, stage 4 - system Maintenance - upholding duties, laws
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postconventional cognitive moral development
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3 stage 5 - social contract and rights, stage 6 - theoretical stage only
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Why is Cognitive Moral Development Important
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most people reason at the conventional level and are looking outside themselves for guidance, that makes "leading" on ethics essential
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machiavellianism
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self interested, opportunistic, deceptive, manipulative
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moral disengagement
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tendency for some individuals to deactivate their internal control system in order to feel okay about doing unethical things
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More Cognitive Barriers
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Thoughts about integrity Illusion of superiority or illusion of morality Paying attention to gut Careful! Gut may be wrong
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Unconscious Biases
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The IAT and race bias The role of emotions
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Unconscious Biases Toward Ethical Action
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Script Processing Cognitive frameworks that guide our thoughts and actions Cost-Benefit Analysis Too simplistic a way of analyzing No moral dimension
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Discrimination
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Unequal treatment based on ones race, gender, ethnicity, national origin, religion, age, disability, etc. Standard for hiring, promotions, etc., should be the ability to do a job
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Conflict of Interest
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Intersection of professional and personal interests Is your judgment or objectivity compromised - or could a third party could think its compromised -- by a relationship you have with an individual or organization
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Conflicts of Interest
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Overt bribes and kickbacks Subtle bribes Influence Privileged information
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Customer Confidence Issues
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Confidentiality Product Safety Truth in advertising Special fiduciary responsibilities
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Employer-Employee Contract
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Expectations Rights Consideration
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Use of Corporate Resources
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Use of corporate reputation Corporate financial resources Providing honest information
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Blowing the Whistle
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How strongly do you feel about this issue? What are your intentions? Think about power and influence Weigh the risks and benefits Consider the timing Develop alternatives
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How to Blow the Whistle
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Approach your immediate manager first Discuss the issue with your family Take it to the next level Contact your company's ethics officer or ombudsman Consider going outside of your chain of command Go outside of the company Leave the company
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Managing Business Ethics Issues
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Confidentiality Product Safety Fiduciary responsibility Providing a reference Social Media Dealing with a journalist Use of corporate resources Providing honest information Human resources issue Conflict of interest issue Customer confidence issue Corporate resources issue
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Organizational Culture
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Expresses shared assumptions, values and beliefs and is the social glue that holds the organization together. Its "how we do things around here." Strong and Weak
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Culture
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A body of learned beliefs, traditions, and guides for behavior shared among members of a society or a group
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Alignment
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all systems are "pushing" employees in the same direction - either ethical or unethical
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Misalignment
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employees get mixed messages about expectations
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Leadership
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Executive Leaders Create Culture Leaders Maintain or Change Organizational Culture
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Ethical Leadership and Ethical Culture
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Unethical Leadership Hypocritical Leadership Ethically Neutral or "Silent" Leadership
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Other Formal Cultural Systems
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Selection Systems Values and Mission Statements Policies and Codes Orientation and Training Programs Performance Management Systems Organizational Authority Structure Decision-making Processes
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Informal Cultural Systems
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Role Models and Heroes Norms: "The Way We Do Things Around Here" Rituals Myths and Stories Language
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Ethical Climates
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Fairness Benevolence Self-Interest Principles
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Ethical Culture Change
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From ethical to unethical From unethical to ethical
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Ethical Culture Changes
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Long-term view Systems view Diagnose/Audit Intervene Evaluate
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The Players
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Rating Agencies CEOs Financial Professionals Mortgage Originators Regulators Legislators Investors Home Owners
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Financial Disaster Results
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Business failures or contractions Government bailouts Unemployment Consumer distress: foreclosures and bankruptcies Tattered reputations (corporations, industries, countries) Plummeting trust in government and institutions
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Business Case for Trust
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91% of consumers purchase products from companies they trust 77% of consumers refuse to purchase products from companies they don't trust
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MBA Oath
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As a business leader, I recognize my role in society. My purpose is to lead people and manage resources to create value that no single individual can create alone. My decisions affect the well-being of individuals inside and outside my enterprise, today and tomorrow.
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Utilitarianism
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Best known consequentialist theory
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Focus on Consequences (Consequentialist Theories)
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Identify alternative actions and consequences to stakeholders Best decision yields greatest net benefits to society Worst decision yields greatest net harms to society
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Consequentialist Questions
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Can I indentify all the stakeholders? Immediate, distant? What are the potential actions I could take? What are the harms and benefits for stakeholders given potential decisions/actions? What decision will produce the most benefit (and least harm) for the greatest number of people, and for society at large?
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Bottom Line
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Action that produces the greatest good for the greatest number of people, for society overall
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Focus on Consequences (Deontological Theories) Advantages
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Practical Already underlies business thinking
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Focus on Consequences (Deontological Theories) Challenges
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Difficult to evaluate all consequences Rights of minorities can be sacrificed
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Ethical Rules Simplified
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Kant's categorical imperative Rawls' veil of ignorance - for deciding what's fair Golden Rule
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Kant's Categorical imperative
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"What kind of world would it be if everyone behaved this way?" "Would I want to live in that world?"
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Rawls' veil of ignorance - for deciding what's fair
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"What would decision be if decision makers knew nothing about their identities or status?"
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Golden Rule
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"Treat others as you would have them treat you" (Assumption is that both parties are ETHICAL! An ethical person wouldn't expect someone else to be unethical for him/her.)
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Deontological Questions
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Which values or principles apply? Which are most important and why? What are my ethical duties, obligations? Have I treated others as I would want to be treated? (Golden Rule) Have I assumed that the other(s) is ethical and responsible? If everyone behaved this way, would that be acceptable? Would I want to live in that world? (Kant's categorical imperative) What would be a fair action if identities were unknown? (Rawls' veil of ignorance)
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Focus on Integrity (Virtue Ethics) Advantages
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Can rely upon community standards
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Focus on Integrity (Virtue Ethics) Challenges
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Limited agreement about community standards Many communities haven't done this kind of thinking Community may be wrong
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Eight Steps to Sound Ethical Decision Making
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1 Gather the facts 2 Define the ethical issues 3 Identify the affected parties 4 Identify the consequences 5 Identify the obligations 6Consider your character and integrity 7 Think creatively about potential actions 8 Check your gut
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Practical Preventive Medicine (When Asked to Make a Snap Decision)
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Pay attention to your gut Ask for time Find out about organizational policy Ask manager or peers for advice Use New York Times test (disclosure rule)
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Individual Differences
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Ethical Decision-Making Style Cognitive Moral Development Locus of Control Machiavellianism Moral Disengagement
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Locus of Control
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An individual's perception of how much control he or she exerts over events in life. External Internal
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Locus of Control Connection to Ethical Behavior
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Internals are more likely to see the connection between their own behavior and outcomes and therefore take responsibility for their behavior. Therefore, internals are more likely to do what they think is right
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Eight mechanisms used for doing Moral Disengagement
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Euphemistic language Moral justification Displacement of responsibility Advantageous comparison Diffusion of responsibility Distorting consequences Dehumanization Attribution of blame
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Cognitive Barriers to Good Ethical Judgment
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Fact Gathering Consideration of Consequences
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Fact Gathering
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Overconfidence "Confirmation Trap";
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Consideration of Consequences
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Reduced number Self vs. others Ignore consequences that affect few Risk underestimated: illusion of optimism, illusion of control Consequences over time - escalation of commitment
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Voicing Your Values
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Purpose, Risk, Personal Communication Style or Preference
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Purpose (Voicing Your Values)
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What are your personal and professional goals? What do you hope to accomplish? What would make your professional life worthwhile?
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Risk (Voicing Your Values)
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What is your risk pro?le? Are you a risk taker, or are you risk averse? What are the greatest risks you face in your line of work? What levels of risk can you live with, and which ones can't you live with?
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Personal Communication Style or Preference (Voicing Your Values)
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Do you deal well with con?ict, or are you nonconfrontational? Do you prefer communicating in person or in writing? Do you think best from the gut and in the moment, or do you need time to re?ect on and craft your communication?
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Voicing Your Values
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Loyalty, Self Image
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Loyalty
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Do you tend to feel the greatest loyalty to family, work colleagues, your employer, or other stakeholders, such as customers?
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Self Image
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Do you identify yourself as being shrewd or naive? As idealistic or pragmatic? As a learner or as a teacher?
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Fairness
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Equity Reciprocity Impartiality
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Equity (Fairness)
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Do people working equally hard receive equal wages?
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Reciprocity (Fairness)
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If you do this, I'll do that.
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Impartiality (Fairness)
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Are you unbiased?
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Sexual Harassment
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Quid Pro Quo Hostile Work Environment
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Quid Pro Quo
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sexual favors are a requirement, or seem to be a requirement, for advancement
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Hostile Work Environment
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a worker feels uncomfortable because of unwelcome comments or behavior of a sexual nature
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Strong Organizational Culture
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assumptions, values, beliefs widely shared
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Weak Organizational Culture
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subgroup norms more influential
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Ethical Culture: Formal Systems
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Executive Leadership Selection System Policies/Codes Orientation/Training Performance Management Authority Structure Decision Processes
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Ethical Culture: Informal Systems
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Role Models/Heroes Norms Rituals Myths/Stories Language
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Executive Ethical Leadership Rests on Two Pillars
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Moral Person Moral Manager
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Moral Person
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Tells followers how leader behaves
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Moral Person Traits
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Honesty Integrity, Trust
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Moral Person Behaviors
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Openness Concern for people Personal morality
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Moral Person Decision Making
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Values based Fair
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Moral Manager
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Tells followers how they should behave and holds them accountable
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Moral Manager Role Modeling
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Takes visible ethical action
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Moral Manager Rewards / Discipline
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Hold people accountable for ethical conduct
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Moral Manager Communicating
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Sends an "ethics and values" message
