Managing to be Ethical: Debunking Five Business Ethics Myths

1. Managing to be Ethical: Debunking Five Business Ethics Myths By Linda Klebe Trevino & Michael E. Brown Presented by: Anna O’Hara

2. Linda Klebe Trevino • Professor of Organizational Behavior and Chair of the Dept. of Mgmt. and Organization at Penn State University • Has a PhD in management from TX A&M Univ. • Widely published and well-known internationally for research and writing on: -Ethical conduct in organizations -Mgmt. of Organizational climate & culture and ethical leadership -Different approaches to ethics mgmt. within an organization

3. Michael E. Brown • Associate Professor of Management at Penn State University • Has a PhD from Penn State University • His research in business ethics and leadership has been published in many leading journals • His work on ethical leadership is used in the ethics training and leadership programs of some corporations.

4. Myths • It’s easy to be ethical • Ethical decisions are complex • Example: Other cultures employ children to help support their family unlike America. • Moral Awareness is required • Aware that there is an ethical choice • “stealing” versus “downloading” music • “forging” versus “signing” documents

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6. Ethical decision making is a complex, multi-stage process • From moral awareness to moral judgement (deciding if an action is morally justifiable) to moral motivation(commitment or intent to take action) then to moral character (action follow- through) • Moral reasoning process stages: • Stage 1, punishment avoidance, through Stage 4, viewing society’s rules and laws as a key influence in deciding what is right, are conventional levels • Stage 5 -“principled” level, thinking is more autonomous and principle-based. (Less then 20% of adults reach this level) • Means most people look outside themselves for guidance and need to be led when it comes to ethics.

7. Organizational context creates additional pressures and complexity • Moral judgement focuses on deciding what is right, moral motivation is deciding the proper action • Since most people look outside themselves for guidance when it comes to ethics, most people will consider the social consequences before deciding on an action • An organizational culture that demands high results may appear to condone questionable ethics practices. • People will also consider what coworkers think.

8. Myths 2. Unethical Behavior in Business is the result of “Bad Apples” • Suggesting that people are naturally ethical or not ethical • Identify and remove the bad to cleanse the organization. • Similar to Dr. Tang’s paper on the love of money and corrupt intent across 31 cultures • A bad apple in this context is a manager with corrupt intent, and moderated by a country’s Corruption Perceptions Index (CPI), which he calls a bad barrel if it is a low CPI, or highly corrupt country

9. People look outside themselves for guidance • This means most unethical behavior in business is supported by the context in which it occurs • Direct reinforcement of unethical behavior or neglect • Yale psychologist, Stanley Milgram’s obedience-to-authority experiments. • “I had no choice” “My boss told me to” • Bottom line is most people are followers, so most likely not inherently “bad apples” • Bad Apples suggests ethics can’t be taught or influenced in adults because we are fully morally formed before we join an organization.

10. Myths 3. Ethics can be managed through formal ethics codes and programs • Research shows that formal ethics and legal compliance programs can have a positive impact but in order for them to influence behavior, they must be part of a larger cultural system that supports ethical conduct. • Example: Arthur Anderson himself created that culture by example, but as the company changed and he was gone, new leaders didn’t follow that same conduct.

11. Myths 4. Ethical leadership is mostly about leader integrity • Certain individual characteristics are necessary but not sufficient for effective ethical leadership • Need to be a strong moral person and strong moral manager • Moral person only tells followers what the leader will do, not what the leader expects them to do • Moral leader only is a hypocrite who doesn’t do what he tells others to do • Ethically silent leadership is when a manager is neither a strong ethical or strong unethical leader. They are neutral.

12. Myths 5. People are less ethical than they used to be • Difficult to test in business but in studies of student cheating found that the percentage of college students who admit to cheating has not changed much in the last 30 yrs. • Unethical conduct is a continuing organizational problem and solutions should be designed to outlast the current media focus.

13. What Execs Can Do 1. Understand the existing ethical culture • For leaders to create a strong ethical culture, the first step is to understand the current state by using anonymous surveys, focus groups and reporting lines. • People need to believe that the leaders really want to know • Use the information to identify the needs for training and other intervention.

14. What Execs Can Do 2. Communicate the importance of ethical standards • Clear and consistent messages that ethics is essential, not just for show. • People must be prepared for typical issues in their position and be taught what to do. • Make ethics and values a part of routine business decisions.

15. What Execs Can Do 3. Focus on the reward system • People do what’s rewarded and avoid what is punished. • Reward and compensate people who are not only good at what they do, but who have also developed a reputation of high integrity. • Unethical conduct should be disciplined swiftly and fairly when it occurs at any level in the organization. • The higher the level of the person disciplined, the stronger the message that mgmt. takes ethics seriously.

16. What Execs Can Do 4. Promote ethical leadership throughout the firm • Ethical leadership means making ethical values visible. • Communicate not only the bottom line goals, but also the acceptable and unacceptable means of getting there. • Senior executives are extremely important because they set the tone at the top and oversee the culture.

17. Ethics Isn’t Easy There are many opportunities to cross into unethical territory. Neglectful leadership and organizational cultures that send mixed messages about what is important and what is expected can lead to unethical conduct. The best way to manage ethical conduct is by aligning the formal and informal cultural systems in support of doing the right thing.