Ethics in Management: Workplace Deviance and Ethical Decision Making

1. Chapter 3 Ethics and Social Responsibility

2. What Would You Do? • PETA v. McDonald’s • Should McDonald’s assure that animals are treated “humanely”? • What ethical guidelines are relevant in this situation?

3. Learning ObjectivesEthics After discussing this section you should be able to: • discuss how the nature of a management job creates the possibility for ethical abuses, • identify common kinds of workplace deviance, • describe the 1991 U.S. Sentencing Commission Guidelines and how its recommendations now make ethical behavior much more important for businesses.

4. Ethics and the Nature of Management Jobs • Ethical behavior follows accepted principles of right and wrong • Intentional managerial unethical behaviors • company resources for personal use • mishandling information • encouraging others’ unethical behavior

5. Ethics and the Nature of Management Jobs (Cont’d.) • Unintentional managerial unethical behavior • poorly constructed policies • unrealistic employee goals

6. Workplace Deviance • Behavior that violates organizational norms about right and wrong • Two dimensions • Degree of deviance • minor to serious • Target of deviant behavior • the organization or particular people

7. Types of Workplace Deviance • Production • Property • Political • Personal Aggression

8. Production Deviance • Hurts the quality and/or quantity of work • Such as leaving early, taking excessively long breaks, etc.

9. Property Deviance • Unethical behavior aimed at company property • Such as sabotage, stealing, damaging equipment, etc.

10. Political Deviance • Using one’s influence to harm others in the company • Such as favoritism, spreading rumors, falsely blaming others, etc.

11. Personal Aggression • Hostile or aggressive behavior toward others • Such as sexual harassment, verbal abuse, threatening others, etc.

12. Workplace Deviance ORGANIZATIONAL • Production Deviance • leaving early • excessive breaks • working slow • wasting resources • Property Deviance • sabotaging equipment • accepting kickbacks • lying about hours worked • stealing from the company MINOR SERIOUS • Personal Aggression • sexual harassment • verbal abuse • stealing from co-workers • endangering co-workers • Political Deviance • showing favoritism • gossiping about co-workers • blaming co-workers • competing nonbeneficially Adapted from Exhibit 3.1 INTERPERSONAL

13. U.S. Sentencing Commission Guidelines • Companies can be prosecuted and punished even if management didn’t know about the unethical behavior • Who, What, and Why • Determining Punishment

14. Who, What, and Why • Nearly all businesses - profit and nonprofit- are covered • Punishes a number of actions • Encourages businesses to be proactive on employee crime

15. Determining Punishment • Smaller fines for companies that are proactive • Steps in determining fine size • determine the base fine • compute a culpability score • multiply the base fine by the culpability score • Compliance programs are important

16. Compliance Program Steps for the 1991 U.S. Sentencing Guidelines • Establish standards and procedures to meet the company’s business needs. • Put upper-level managers in charge of the compliance program. • Don’t delegate decision-making authority to employees who are likely to act illegally or unethically. • Use auditing, monitoring, and other methods to encourage employees to report violations. • Use company publications and training to inform employees about the company’s compliance standards and procedures. • Enforce compliance standards by fairly and consistently disciplining violators. • After violations occur, find appropriate ways to improve the compliance program. Adapted from Exhibit 3.2

17. Learning ObjectivesMaking Ethical Decisions After discussing this section you should be able to: • describe what influences ethical decision making, • explain what practical steps managers can take to improve ethical decision making.

18. Influences on Ethical Decision Making • Ethical Intensity of the Decision • Moral Development of the Manager • Ethical Principles Used to Solve the Problem

19. Magnitude of consequences Social consensus Probability of effect Temporal immediacy Proximity of effect Concentration of effect Ethical Intensity of the Decision

20. Moral Development of the Manager Preconventional Level Stage 1: Punishment & Obedience Stage2: Instrumental Exchange Conventional Level Stage 3: Good Boy - Nice Girl Stage 4: Law & Order Post Conventional Level Stage 5: Legal Contract Stage 6: Universal Principle Adapted from Exhibit 3.3 Davidson & Worrell, Business & Society 34 (1995): 171-196

21. Principle of Long-term Self-interest Principle of Personal Virtue Principle of Religious Injunctions Principle of Government Requirements Principle of Utilitarian Benefits Principle of Individual Rights Principle of Distributive Justice Principles of Ethical Decision Making

22. Principle of Long-Term Self-Interest • People should never take any action that is not in their or their organization’s long-term self-interest • The key is long-term, not short-term interests

23. Principle of Personal Virtue • People should never do anything that is not honest, open, and truthful, and which they would not be glad to see reported in the newspapers or on TV

24. Principle of Religious Injunctions • People should never take an action that is unkind or that harms a sense of community, such as the positive feelings that come from working together to accomplish a commonly accepted goal.

25. Principle of Government Requirements • The law represents the minimal moral standards of society • People should never take any action that violates the law.

26. Principle of Utilitarian Benefits • People should never take any action that does not result in greater good for society • People should do whatever creates the greatest good for the greatest number

27. Principle of Individual Rights • People should never take any action that infringes on others’ agreed-on rights

28. Principle of Distributive Justice • People should never take any action that harms the least among us in some way

29. Practical Steps to Ethical Decision Making • Selecting and Hiring Ethical Employees • Codes of Ethics • Ethics Training • Ethical Climate

30. Selecting and Hiring Ethical Employees • Increase ethical behaviors by hiring more ethical employees • Testing for ethics • Overt integrity tests • Personality-based integrity tests

31. What Really Works? Workplace Deviance (Counterproductive Behaviors) Overt Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 82% Probability of success Personality-Based Integrity Tests & Workplace Deviance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 68%

32. What Really Works? (Cont’d.) Job Performance Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 69% Personality-Based Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 70%

33. What Really Works? (Cont’d.) Theft Overt Integrity Tests & Job Performance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 57%

34. Codes of Ethics • Corporate statements on ethics • The relationship between codes and behavior depend on: • companies communicating the codes to others both within and outside the company • companies developing practical ethical standards and procedures specific to the company’s line of business

35. Ethics Training • Develop employee awareness about ethics • Achieve credibility with employees • Teach employees a practical model of ethical decision making

36. A Basic Model of Ethical Decision Making Identify the problem Identify the constituents Analyze your options Diagnose the situation Make your choice Act Adapted from Exhibit 3.5

37. Managers act ethically Managers are active in the ethics program Ethical Climate An effective reporting system Fairly and consistently punish violators

38. Learning ObjectivesSocial Responsibility After discussing this section you should be able to explain: • to whom organizations are socially responsible, • for what organizations are socially responsible, • how organizations can choose to respond to societal demands for social responsibility, • whether social responsibility hurts or helps an organization’s economic performance.

39. To Whom Are Organizations Socially Responsible? • Shareholders • managers must satisfy the owners • social responsibility is maximizing shareholder wealth • Stakeholders • persons with a legitimate interest in the company • social responsibility is satisfying the interests of multiple stakeholders

40. Been There, Done That Anita Roddick, founder and co-chair of The Body Shop International PLC • Large multinational corporations are the cause of many social problems • Businesses should be audited socially & environmentally • She is an activist against corporate corruption

41. Shareholders Only - Friedman • Managers cannot act effectively as moral agents for shareholders • Time, money, and attention diverted to social causes undermine market efficiency

42. Stakeholder View special interests Primary Stakeholders media Company government shareholders employees suppliers Secondary Stakeholders customers

43. For What Are Organizations Socially Responsible? Legal Responsibilities Discretionary Responsibilities Economic Responsibilities Ethical Responsibilities Adapted from Exhibit 3.8 Carroll, Academy of Management Review 4 (1979): 497-505

44. Blast From The Past100 Years of Corporate Philanthropy • 1800s - doctrine of ultra vires • Benefits to employees allowed in late 19th century • 1940s corporate philanthropy took place • Now, U.S. companies donate approximately $6 billion a year

45. Responses to Demands for Social Responsibility Reaction Defense Accommodation Proaction Do only what is required Be Progressive Lead the industry Fight all the way Public Relations Approach Withdrawal Legal Approach Bargaining Problem Solving Do Nothing Do Much Adapted from Exhibit 3.9 Carroll, Academy of Management Review 4 (1979): 497-505

46. Social Responsibility and Economic Performance • Social responsibility can sometimes cost a company significantly if it chooses to be socially responsible • Sometimes it does pay to be socially responsible • While socially responsible behavior may be “the right thing to do,” it does not guarantee profitability

47. What Really Happened? • McDonald’s formed the Animal Advisory Council • Developed Animal Welfare Guiding Principles • McDonald’s changed their egg purchasing practices