Ethical Decision Making

1. Ethical Decision Making

2. Ethicssome definitions … • Moral values- refers to people’s fundamental beliefs regarding what is right or wrong, good or bad • Ethics- refers to standards of conduct which are based on moral values, that guide people’s decisions and behaviors

3. Companies should care about ethics because … GOOD ETHICS IS GOOD BUSINESS • Improve financial performance • Reduce operating costs • Enhance corporate reputation • Increase ability to attract and retain employees

4. Ethics in OrganizationsWhy are ethics important to organizational behaviorists? • Research shows from 2000-2003 top managers More likely to: • Keep promises • Attention to honesty and respect • Report unethical behavior Less likely to: • Feel less pressure • Engage in misconduct (Greenberg, 2005)

5. Ethics in organizations cont… • Public acceptance is changing “Ethical standards, whether formal or informal, have changed tremendously in the last century …Standards are considerably higher. Business-people themselves, as well as the public, expect more sensitive behavior in the conduct on economic enterprise. The issue is not just having the standards, however. It is living up to them” -Henderson (1992)

6. Sometimes, some people behave unethically … • Individual factors • Situational factors Scientists studying organizational behavior are interested in how the external workplace (barrels) influence behavior, as well as individual processes (apples).

7. Influences on ethical behavior

8. Article I Bad Apples in Bad Barrels: A Causal Analysis of Ethical Decision-Making Behavior Linda Klebe Trevino and Stuart A. Youngblood

9. Objectives • To investigate • moral reasoning • moral behavior • Effects on ethical decision making in organizations • individual influences • organizational influences

10. Key Factors in Individual Influences • Locus of Control(LC) • An individual’s perception of how much control he or she has over events in one’s life • Cognitive Moral Development (CMD) • Differences among people in their capacity to engage in the kind of reasoning that enables them to make more judgments.

11. The “Bad Apples” Argument • Individual Differences Approach attributes unethical behavior to individuals lacking in moral character • Research suggests locus of control (LC) and cognitive moral development are significantly related to ethical decision making

12. Individual Influences on Ethical Decision Making • Locus of control has been directly related to moral behavior • Individuals with internal LC are more likely to • Do what is right • Recognize contingency relationship between behaviors and outcomes • This study hypothesizes that LC will influence ethical decision making through outcome expectancies

13. Individual Influences on Ethical Decision Making • Cognitive moral development has been divided into six stages by Kohlberg (1969) • Empirical data supports the model and the relationship between the stage of CMD and moral behavior, including ethical decision making • This study hypothesizes that CMD will independently and directly influence ethical decision making behaviors

14. The “Bad Barrels” Argument • Organizational Approach attributes unethical behavior to environmental workplace conditions such as: competition pressure from authority extrinsic rewards for unethical behavior lack of reinforcement of ethical behavior

15. Organizational Influence on Ethical Decision Making • Bandura’s (1971)Social Learning Theory(SLT) • Demonstrates the use of vicarious learning to support ethical behavior in the organization by either • Rewarding ethical behavior • Punishing unethical behavior • SLT suggests vicarious learning influences the behavior of the observer based on their outcome expectancies • This study hypothesizes that observational learning will influence ethical behavior through outcome expectancies

16. Predictions of Hypotheses • Rewarding ethical behavior or punishing unethical behavior was expected to increase outcome expectancies, which leads to more ethical behavior • Compared to external LC, individuals with internal LC will have higher outcome expectancies and behave more ethically • Subjects at higher stages of CMD were expected to behave more ethically

17. Methods and Procedures • 94 MBA students 72 male, 21 female, 1 gender unspecified ages 22-45 (M=26) • Each subject individually completed In-basket exercise Post-exercise questionnaire LC and CMD measures

18. Some Procedure Details … • In-basket exercise –provided learning vicarious manipulations Ethical behavior rewarded Unethical behavior punished control • Post exercise questionnaire –measured outcome expectancies • CMD -measured using the Defining Issues Test (DIT) (Rest, 1979) • High scores related to higher stages of cognitive moral development • LC –measured using the Social Reaction Inventory (SRI) (Rotter,1966) • Lower scores indicate internal locus of control and high scores indicate external LC

19. Results • Subjects who perceived the organization to support ethical behavior (reward condition) exhibited higher outcome expectancy beliefs resulting in more ethical decisions made • There was no significant correlation between vicarious punishment and ethical decision making • The individual influences hypothesized about LC and CMD were strongly supported • Subjects with internal LC exhibited more ethical behavior than those with external LC • CMD was significantly related to ethical behavior. Subjects at higher stages of CMD were more ethical

20. Take Home Message Ethical decision making in organizations is a complex process influenced by the interplay between individual differences, the cognitive processes of making ethical decisions, and how organizations manage the ethical standards in the workplace.

21. Positive Points • 1) Attracting and selecting future employees • Assessing CMD and LC • 2) Training of future employees • CMD training

22. Negative Points • 1) Questions of external validity: • lab setting, • MBA students, • male/female ratio • 2) Controlling for social desirability

23. Article 2Ethical leadership: A social learning perspective for construct development and testingBrown M.E, Treviño L.K, & Harrison D.A.

24. Purpose • The purpose of this study was to evaluate the importance of ethical leadership in organizations and provide some insight into the ways in which leaders can model good ethical behavior for employees.

25. Key Terms • Social learning: A theory that suggests people learn from one another through observation, imitation, and modeling (Bandura, 1971). • Idealized influence: When leaders act as role models for followers to emulate, as well as upholding high standards of ethical and moral conduct. • Ethical leadership: consideration behavior, honesty, trust and interactional fairness ( Brown, Trevino, Harrison, 2005)

26. Transformational leadership • Burns (1978) said that “transforming” leaders inspire followers by aligning their own and their followers’ value systems toward important moral principles

27. Quote • “The spirit of morality…is awakened in the individual only through the witness and conduct of a moral person” (Aristotle).

28. Hypothesis • Social learning theory is a theoretical basis for leadership and ethical decision making. • Leadership shapes ethical conduct since most employees look outside of themselves for ethical guidance. • Employees learn vicariously- through watching others

29. Methods • Sample: 154 MBA students at two large state universities • pre-screened for work experience • 48 item survey • Asked to describe a supervisor they regarded as en ethical leader (e.g, what made him/her an ethical leader and what traits and/or sets of behaviors were important to demonstrate ethical leadership.

30. Findings • Ethical leadership , idealized influence and vicarious learning lead to good ethical decision-making behavior in employees • Leaders in an organization influence ethical decision making in employees by modeling behavior. • When employers are trustworthy and ethical role models, employees will: • be more satisfied with their supervisors/leaders • devote extra effort into their work • be more likely to report problems to their employers

31. Implications • Moral judgment and ethical behavior can be learned • People with external LC look to others on how to behave more than those with internal LC. • Good role models set good examples

32. Take home messages • People learn by observing others. • Ethical behavior is not fixed within the individual and can be influenced by others • Ethical leaders encourage employees to act ethically

33. Article 3Development of a Personality Biodata Measure to Predict Ethical Decision MakingManley, G.G., Benavidez, J., & Dunn, K.

34. Purpose • The purpose of this study was to develop and test a measure to assess and predict ethical decision-making behavior among employees. This study focused on both the locus of control and conscientiousness as individual antecedents, or predictors, of ethical decision-making behavior.

35. Key terms • Biodata: A personnel measurement technique that is useful in tapping motivational, attitudinal, and intellectual characteristics. • Conscientiousness: In psychology, conscientiousness is the trait of being careful, self-diciplined, thorough, organized and and thinking before acting. • Internal locus of control: refers to the extent to which individuals believe they can control the events that affect them, specifically, the rewards they receive in life. • External locus of control: refers to those who believe that powerful others, fate or chance primarily determine life events/rewards

36. Hypothesis • The hypothesis of this study was that biodata scales of internal locus of control and conscientiousness would be statistically significant predictors of ethical decision making.

37. Methods • Sample size: 223 undergraduates at a large southwestern university • mean age: 23.3 • 57% women/43% men • 41% white/43% Hispanic/ 16% other • pre-screened for work experience: 5.2 years average

38. Methods (continued) • In basket-test • 14 items • 2 involved ethical decision making. • Answers to these two questions were pre-determined to be either ethical or non-ethical • Participants who made at least one unethical decision were considered to have engaged in unethical behavior. • Unethical behavior is rather uncommon • Only the participants who made ethical decisions on both occasions were considered to have engaged in ethical behavior

39. Measures • Locus of control: the biodata measure created in this study tapped into behaviors indicative of either external or internal locus of control. • Likert scale: respondents specify their level of agreement to a statement • 1-4 range • Based on Rotter’s (1996) Locus of Control Scale • Participants indicated the extent to which they had engaged in a particular behavior. High scores indicated an internal locus of control

40. Measures • Conscientiousness: the biodata measure created in this study tapped into past behaviors that were indicative of either very conscientious or non-conscientious behaviors in organizational settings • Likert scale: respondents specify their level of agreement to a statement • 1-4 range • Participants indicated the extent to which they had engaged in a particular behavior. High scores indicated high conscientiousness.

41. Findings • Both the locus of control (LC) and conscientiousness biodata scales significantly correlated with ethical decision making behavior • Those with high internal LC were more likely to respond ethically than those with external LC • It is theorized that people with internal LC can see the relationship contingencies between their actions and outcomes/rewards, and thus are more likely to make ethical decisions.

42. Implications • Today’s organizations are increasingly looking to select employees that will make good ethical decisions. • Organizations can expect increased profitability by selecting people with good ethical decision making and behavior. • McKendall & Wagner (1997) found that, after an analysis of data from 80 USA industrial organizations, lower profitability was associated with higher frequencies of violations of federal and environmental laws. • Organizations want to employ people who make good ethical decisions and use background information and biodata, such as LC and CMD training.

43. Take home messages • Internal locus of control (LC) refers to the extent to which individuals believe they can control the events that affect them, specifically, the rewards they receive in life. People need to feel in control of their environments to make good, ethical decisions. • While many factors contribute to ethical decision making, such as CMD and conscientiousness, research has prominently and consistently shown that Locus of Control is a personality variable possessing significant explanatory power in predicting ethical decision making. • The connection between internal LC and ethical decision making lies within the ability to see the rewards for ones actions.

44. Demographics of Internal LC • Familial: • Many internals have grown up with families that emphasized effort, education, responsibility and thinking. Parents typically gave their children rewards they had promised them (Schultz, 2005). • Many externals are typically associated with lower socioeconomic status, because they have less control over their lives. Societies experiencing social unrest increase the expectancy of being out-of-control, so people in such societies become more external (Schultz, 2005).

45. Demographics (continued) • Cross-cultural: • Asians- more external • Caucasians- more internal • African Americans-more external • oppression • lower socioeconomic status • Hispanics and other minorities- ambiguous (Berry et al., 1992)

46. Solutions • Create an environment where rewards are visible, equitable, and are directly associated with ethical behavior • Punish unethical behavior/Reduce extrinsic rewards for ethical behavior • Allow employees to feel a sense of control/input in their work environment • Role of senior leaders: • act as role models and model good behavior • communicate and reinforce the organization’s principles on a regular basis • Although there is no universal model for ethical behavior, senior leaders should ensure that the organization’s mission and vision are aligned with its ethical principles. • CMD training

47. Contemporary examples: Organizations acting ethically

48. Levi Strauss & Co. • Chairman Robert D. Haas claims, • “Levi has always treated people fairly and cared about their welfare. …In the past however, that tradition was viewed as something separate from how we ran the business.…The soft stuff was the company’s commitment to our work force. And the hard stuff was what really mattered; getting pants out the door. What we’ve learned is that the soft stuff and the hard stuff are becoming increasingly intertwined. A company’s values- what it stands for, what it’s people believe in- are crucial to its competitive success. Indeed values drive the business….Values are where the hard stuff and the soft stuff come together.”

49. The Universal Display Corporation • Code of Ethics & Code of Conduct For Employees: revised Dec. 20, 2006 • “These corporate policies and procedures provide general guidance for business conduct by UDC personnel but do not address all possible situations that may arise. All employees should take the time to think about the ramifications of their business decisions.” • Actively support and encourage ethical behavior and compliance to all laws and regulations • Provide protection again retribution

50. -THE END-Thank you.Alexandra Glasser and Brittney Brooker