PST 325

I.          ETHICS AND STAKEHOLDERS.

A.     The individuals and groups that have an interest, claim, or stake in an organization and in what it does are known as organizational stakeholders.

1.      In order to survive and prosper, an organization must effectively satisfy its stakeholders.

a.      Stockholders want dividends.

b.      Managers and workers want salaries and stable employment.

c.      Customers want high-quality products at reason able prices.

2.      Managers are the stakeholder group that deter mines which goals an organization should pursue to most benefit stakeholders.

3.      Managers frequently have to juggle the interest of different stakeholders, including themselves.

4.      Managerial decisions that may benefit some stake holder groups and harm others involve questions of ethics.

B.     Ethics.

1.      Ethics are moral principles or beliefs about what is right or wrong.

a.      These beliefs guide individuals in their dealings with others and provide a basis for deciding whether behavior is right and proper.

b.            Ethics guide managers in their decisions about what to do in various situations.

2.      Managers often experience an ethical dilemma when they confront a situation that requires them to choose between two courses of action.

a.      Managers must weigh the competing claims or rights of the various stakeholder groups.

b.      Sometimes, making a decision is easy because some obvious standard applies.

c.      In other cases, managers have trouble deciding what to do.

3.      Three models help determine whether a decision is ethical: the utilitarian, moral rights, and justice models.

a.      Each model offers a different and complementary way of determining whether a decision or behavior is ethical.

b.      All three models should be used to sort out the ethics of a particular course of action.

4.      Another practical guide is to answer the following questions:

a.      Does my decision fall within the accepted values or standards that typically apply.

b.      Am I willing to see the decision communicated to all stakeholders affected in it?

c.      Would the people with whom I have a significant personal relationship approve of the decision?

5.      An ethical decision is a decision that reasonable or typical stakeholder would find acceptable because it aids stakeholders, the organization, or society.

6.      An unethical decision is a decision a manager would prefer to disguise or hide from other people because it enables a company or individual to gain at the expense of society or other stakeholders.

C.     Sources of an Organization’s Code of Ethics.

1.      Codes of ethics are formal standards and rules that managers can use to help themselves make appropriate decisions.

2.      An organization’s code of ethics derives from three sources in the organizational environment.

3.      Societal ethics.

a.      Societal ethics are standards that govern how members of a society deal with each other in matters involving issues such as fairness, justice, poverty, and the rights of individuals.

i.       Societal ethics emanate from society’s laws, customs, and practices, and the unwritten values and norms.

ii.      People may automatically behave ethically because they have internalized values and norms.

iii.    Not all values and norms are internalized, however.

b.      Societal ethics vary among societies.

i.       Ethical standards accepted in the U.S. are not accepted in all other countries.

ii.      In many economically poor countries bribery is standard practice to get things done.

iii.               In the U.S. and many other Western countries, bribery is considered unethical.

c.      Societal ethics control self-interested behavior by individuals and organizations.

i.       Laws spelling out what is appropriate business practice provide benefits to everyone.

ii.      Free and fair competition is possible only when laws and rules level the playing field and define what behavior is acceptable.

4.      Professional ethics are standards that govern how members of a profession, managers, or workers, make decisions when the decision is not clear-cut.

a.      Medical ethics govern the way doctors and nurses are to treat patients.

b.      Most professional groups can impose punishments for violations of ethical standards.

c.      Within an organization, professional rules and norms often govern how employees act in certain situations.

d.      These rules and norms may become part of the organization's code of ethics.

e.      Workers internalize the rules of their profession and often follow them automatically.

5.      Individual ethics are personal standards and values that govern how individuals interact with other people.

a.      Sources include the influence of one’s family, peers, and upbringing.

b.      The experiences gained over a lifetime also con tribute.

c.      Many decisions one person finds unethical may be acceptable to another person.

d.      Within an organization, the individual ethics of top managers are important in shaping the organization’s code of ethics.

6.      Societal, professional, and individual ethics factor into the development of organizational codes of ethics.

D.     What Behaviors Are Ethical?

1.      A key ethical decision facing managers is how to apportion harms and benefits among stakeholder groups.

2.      The decision about how to divide profits among managers, workers, and stockholders is also an ethical issue.

3.            Deciding how to apportion harms when things go wrong, such as employee layoffs, is another ethical issue.

a.      Chrysler took a radical approach, laying off 65% of its workforce.

b.      Other companies spread the layoffs over a longer term.

c.      The decision to pay layoff benefits is typically an ethical choice made by a company’s top managers.

d.      Workers have a weaker claim on a company than do stockholders because they usually have no legally enforceable ownership rights.

e.      Deciding how to distribute organizational re sources becomes an ethical issue.

4.      Ethical issues loom large when a manager’s decision is not governed by legal requirements and it is up to the manager to determine the appropriate actions to take.

a.      In western Europe, organizations are required by law to give employees layoff payments, but there are no such laws in the U.S.

b.      Another ethical concern on a global level is whether it is ethical to use child labor.

5.      Managers also face ethical dilemmas when choosing how to deal with certain stakeholders.

a.      An organization that is a powerful customer to their suppliers is in a position to demand that suppliers reduce their prices.

b.      In the early 1990s Wal-Mart pressured suppliers to reduce prices, but realized that it had to work with suppliers to find ways to reduce costs for all parties.

6.      Customers are a critical stakeholder group because organizations depend on them for their survival.

a.      Customers have the right to expect an organization to provide goods and services that will not harm them.

b.      A system of laws protects consumers in the U.S., and they have legal rights for recourse if organizations provide unsafe products.

c.      When issues are not under the direct control of legal rules, an organization’s code of ethics determines how the organization addresses such issues.

7.      Local communities and the general public also have a stake in whether the decisions that managers make are ethical.

a.      The economic health of the downtown area and the level of prosperity all depend on choices made by managers.

b.      Decisions to lay off workers or open a large retail store have local consequences.

8.      Managers face many ethical choices as they deal with different, and sometimes conflicting, interests of organizational stakeholders.

E.      Why Would Managers Behave Unethically Toward Other Stakeholders?

1.      Typically, unethical behavior—behavior that falls outside the bounds of accepted standards or values—occurs because managers put their personal interests above the interests of other stakeholders.

a.      Managers might feel tempted to engage in unethical acts if the harm done to stakeholders is indirect or seems insignificant.

b.      Family, upbringing, and religion help teach people how to distinguish between right and wrong behavior.

c.      Managers who let self-interest take control of their decision making and ignore societal ethics are often those who have a poor or undeveloped code of individual ethics.

2.      Managers and workers may have other reasons to act unethically, feeling pressured by the situation.

a.      The behavior of other managers may cause managers to behave unethically.

b.      Often managers under intense pressure to per form encourage subordinates to act in dubious ways.

F.      Why Should Managers Behave Ethically?

1.      Managers must strongly resist pressures to behave unethically because of the harm that unethical behavior inflicts on others.

2.      One major task of managers is to protect and nurture the resources under their control.

a.      Any organizational stakeholder who advances his or her own interests wastes collective resources.

b.      Unethical behavior that goes unpunished creates incentives for people to put their self-interest above the rights of others.

3.      A safeguard against unethical behavior is the potential for loss of reputation.

a.      Reputation, the esteem or high repute that individuals or organizations gain when they behave ethically, is a valuable asset.

b.      If a manager misuses resources, the manager’s reputation will suffer.

c.      Behaving unethically in the short run can have serious long-term consequences.

d.      All stakeholders—suppliers, customers, and workers have reputations to lose.

4.      If a manager or company is known for being unethical, other stakeholders are likely to view that person with suspicion and the reputation of each will be poor.

5.      If all stakeholders are alert to the need to stop unethical behavior, then the level of unethical behavior falls.

II.        SOCIAL RESPONSIBILITY.

A.     Social responsibility refers to a manager’s duty or obligation to make decisions that nurture, protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole.

B.     Approaches to Social Responsibility.

1.      The strength of organizations’ commitment to social responsibility ranges from low to high.

2.      At the low end is an obstructionist approach—disregard for social responsibility, willingness to engage in and cover up unethical and illegal behavior.

3.      A defensive approach indicates at least a commitment to ethical behavior.

a.      Defensive managers stay within the law but make no attempt to exercise social responsibility beyond what the law dictates.

b.      When making ethical choices, these managers put the claims and interests of their shareholders first, at the expense of other stakeholders.

c.      Defensive managers have little active interest in social responsibility.

4.      An accommodative approach is an acknowledgment of the need to support social responsibility.

a.      Accommodative managers try to balance the interests of different stakeholders against one another so that the claims of stockholders are seen in relation to the claims of other stakeholders.

b.      Managers want to make choices that are reason able in the eyes of society.

5.      Managers taking a proactive approach:

a.      Actively embrace the need to behave in socially responsible ways.

b.      Go out of their way to learn about the needs of different stakeholder groups.

c.            Are willing to utilize organizational resources to promote the interests not only of stockholders, but of the other stakeholders.

C.     Why Be Socially Responsible?

1.      Several advantages result when managers and organizations behave in a socially responsible manner.

a.      Workers and society benefit directly because organizations bear some of the costs of helping workers.

b.      If all organizations in a society were socially responsible, the quality of life as a whole would be higher.

c.      Another reason for being socially responsible is that it is the right thing to do.

d.      Companies that act responsibly toward their stakeholders benefit from increasing business and see their profits rise.

2.      However, although some stakeholders benefit from managers’ commitment, other stakeholders, particularly shareholders, may think they are being harmed.

3.      How should managers decide which social issues they will respond to?

a.      All managers and workers should be alert and report unethical behavior promptly.

b.      The term whistle-blower refers to a person who reports illegal or unethical behavior and takes a stand against unscrupulous managers.

c.      Laws now exist to protect the interests of whistle-blowers.

4.      A social audit allows managers to take into consideration both the private and social effects of particular decisions.

a.      They rank various alternative courses of action according to both their profitability and their social benefits.

b.      Decisions showing both high profitability and high social benefits are the most likely to be adopted.

5.      Managers can also decide whether they are acting socially responsibly by applying ethical standards and values.

a.      Managers’ own ethics influence their behavior.

b.      An organization’s code of ethics also influences how conscientiously managers seek to support the interests of all their stakeholders.

6.      Evidence suggests that managers who behave socially responsibly will most benefit all organizational stakeholders.

a.      Socially responsible companies, in comparison with less responsible competitors, are less risky investments, tend to be more profitable, and have better reputations.

b.            Socially responsible companies are also sought out by communities.

D.     Promoting Ethics and Social Responsibility.

1.      Establishing Ethical Control Systems.

a.      The most important step to encourage ethical behavior is to develop a code of ethics that is given to every employee.

b.      Next, provide a visible means of support for ethical behavior.

c.      Organizations are increasingly creating the role of ethics officer, or ethical ombudsman, to monitor their ethical practices.

d.      Because the ombudsman has organization-wide authority, members in any department can communicate unethical behavior without fear of retribution.

2.      Developing an Ethical Culture.

a.      An organization can also make ethical values and norms a central part of its organizational culture.

b.      Each organization has a set of values and norms, embedded in its code of ethics, that it teaches to employees.

c.      High standards and strong values and norms help individuals resist self-interested actions.

3.      The managers’ role in developing ethical values and standards in other employees is very important.

a.      The actions of top managers represent the values of their organizations.

III.       MANAGING AN INCREASINGLY DIVERSE WORKFORCE.

A.     An important management issue to emerge recently has been the increasing diversity of the workforce.

1.            Diversity is dissimilarities—differences—among people due to age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background, and capabilities/disabilities.

a.      Diversity raises important ethical issues and social responsibility issues.

b.      If not handled well, these issues can badly dam age an organization.

2.      Trends:

a.      Between 1979 and 1992, the number of women in the workforce increased at twice the rate of men.

b.      By the year 2005, between 61-65% of women will be working.

c.      The number of women, minorities, people with disabilities, and gays and lesbians in the workforce is steadily increasing.

3.      Diversity Issues.

a.      It is a strong ethical imperative that diverse people should receive equal opportunities and be treated fairly and justly.

b.      Effectively managing diversity can improve organizational effectiveness.

c.      Diverse individuals continue to experience unfair treatment in the workplace as a result of biases, stereotypes, and overt discrimination.

i.       Ninety-seven percent of the top managers of the 1,500 largest companies in the U.S. are white men.

ii.      Glass ceiling alludes to the invisible barriers that prevent minorities and women from being promoted to top corporate positions.

iii.    African-Americans have the hardest time being promoted and climbing the corporate ladder.

iv.     Asians are often stereotyped into technical jobs, and Hispanics are assumed to be less well educated than other minority groups.

B.           The Ethical Imperative to Manage Diversity Effectively.

1.      Two moral principles guide managers in meeting this imperative.

2.      Distributive Justice.

a.      The principle of distributive justice dictates   that the distribution of pay raises, promotions, job titles, interesting job assignments, office space, and other organizational resources among members of an organization be fair.

b.      The distribution of these outcomes should be based on the contributions that individuals have made to the organization and not on irrelevant personal characteristics.

c.      Fifty years ago, overt discrimination against women and minorities was common; today, organizations are moving closer to the ideal of distributive justice.

i.       Women hold only 31 percent of managerial positions.

ii.      Bias against female managers is a major obstacle to distributive justice.

iii.    In some industries, those with an “old boys’ club” culture, women and minorities have a difficult time overcoming the managerial bias against them.

d.      In many countries, managers have a legal obligation to treat all employees fairly, and they risk being sued by employees who feel unfairly treated.

3.      Procedural Justice.

a.      The principle of procedural justice requires  managers to use fair procedures to determine how to distribute outcomes to organizational members.

b.      Procedural justice exists when managers:

i.       Carefully appraise a subordinate’s performance.

ii.      Take into account any environmental obstacles to high performance beyond the subordinate’s control.

iii.    Ignore irrelevant personal characteristics.

c.      Procedural justice is necessary to ensure ethical conduct and avoid costly lawsuits.

C.     Effectively Managing Diversity Makes Good Business Sense.

1.      The diversity of organizational members can be a source of competitive advantage.

2.      The variety of points of view that diverse employees provide can improve managerial decision making.

3.      Just as the workforce is becoming increasingly diverse, so too are the customers who buy the organization’s goods.

4.      Diverse members of an organization are likely to be attuned to what goods and services diverse segments of the market want.

5.      Managers concerned about diversity are insisting that their suppliers also support diversity.

D.     Why Are Diverse Employees Sometimes Treated Unfairly?

1.      Diverse organizational members are still sometimes treated unfairly.

2.      Biases.

a.      Biases are systematic tendencies to use information about others in ways that result in inaccurate perceptions.

b.      The similar-to-me effect is the tendency to perceive others who are similar to ourselves more positively than we perceive people who are different.

i.       Managers are likely to be white men.

ii.      They may unintentionally perceive other white men more positively than they perceive women and minorities.

c.      The social status effect is the tendency to perceive individuals with high social status more positively than we perceive those with low social status.

i.       Because women and minorities have traditionally had lower social status than white men, the social status effect may lead some people to perceive women and minorities less positively than they perceive white men.

d.      Salience—conspicuousness—is another source of bias.

i.       The salience effect is the tendency to focus attention on individuals who are conspicuously different from us.

ii.      Salient individuals are more often the object of attention than are other workers.

iii.    Individuals who are salient are often perceived to be primarily responsible for outcomes.

3.      Stereotypes.

a.      Stereotypes are simplistic and often inaccurate beliefs about the typical characteristics of particular groups of people.

b.      Stereotypes are usually based on a highly visible characteristic.

c.      Managers sometimes assume erroneously that a person possesses a whole host of characteristics simply because she or he happens to be a member of a minority group.

4.      Overt Discrimination.

a.      Overt discrimination occurs when managers knowingly and willingly deny diverse individuals access to opportunities and outcomes in an organization.

b.      Overt discrimination is not only unethical, but also illegal.

E.      Overt discrimination and decisions based on stereo types are clear violations of principles of distributive and procedural justice.

IV.              HOW TO MANAGE DIVERSITY EFFECTIVELY.

A.     Managers need to ensure that they and their subordinates appreciate the value that diversity brings to an organization.

B.           Increasing Diversity Awareness.

1.      It is natural to view other people from your own perspective.

2.      The ability to appreciate diversity requires people to become aware of other perspectives.

3.      Diversity awareness programs in organizations strive to increase managers’ awareness of:

a.      Their own attitudes, biases, and stereotypes.

b.      The differing perspectives of diverse managers, coworkers, and customers.

4.      Diversity awareness programs often have these goals:

a.      Providing organizational members with accurate information about diversity.

b.      Uncovering personal biases and stereotypes.

c.      Assessing personal beliefs, attitudes, and values and learning about other points of view.

d.      Overturning inaccurate stereotypes and beliefs about different groups.

e.      Developing an atmosphere in which people feel free to share their differing perspectives.

f.       Improving understanding of others who are different from oneself.

C.     Increasing Diversity Skills.

1.      Understanding How Cultural Differences Affect Working Styles.

a.      Educating managers and their subordinates about why people differ in the ways they think, communicate, and work can help all members develop a respect for diversity.

b.      Different approaches to decision making by Japanese managers and American managers, for instance, are by-products of cultural differences.

2.      Being Able to Communicate Effectively with Diverse People.

a.      Diverse organizational members may have different styles of communication.

b.      Managers and their subordinates must learn to communicate effectively.

c.      Organizational members should also feel comfortable enough to solve communication difficulties and misunderstandings as they occur.

d.      Diversity education can help managers gain a better understanding of how people may interpret certain kinds of comments.

3.      Being Flexible.

a.      Managers must learn how to be open to different approaches and ways of doing things.

b.      They must be open to, and not feel threatened by, different approaches and perspectives.

D.     Techniques for Increasing Diversity Awareness and Skills.

1.      Many managers use a multipronged approach to increase diversity awareness and skills.

a.      Providing a forum for people to discuss their differing attitudes can increase awareness.

b.      Also useful are role-plays that enact problems resulting from lack of awareness.

2.      Managers sometimes hire outside consultants to provide diversity training or have their own experts in-house.

3.      United Parcel Service developed a community internship program to increase diversity awareness.

a.      These managers learn about different cultures and approaches to work and life.

b.      They learn to interact effectively with people with whom they ordinarily do not come into contact.

E.      The Importance of Top-Management Commitment to Diversity.

1.      When top management is truly committed to diversity, top managers embrace diversity through their actions and example.

2.      If top managers commit resources to diversity, but as individuals do not value diversity, any initiatives they undertake are likely to fail.

3.      Many top managers need help in developing their own diversity awareness and related skills.

F.      Managers can take a variety of steps to manage diversity effectively.

1.      They must make a long-term commitment to diversity.

2.      Effective management of diversity is an ongoing process.

V.        SEXUAL HARASSMENT.

A.     Sexual harassment seriously damages both the people who are harassed and the reputation of the organization in which it occurs.

1.      It can also cost organizations huge amounts of money.

2.      Sixty percent of the 607 women surveyed by the National Association for Female Executives indicated that they had experienced some form of sexual harassment.

3.      Sexual harassment is not only unethical, it is also illegal.

4.      Managers have an ethical obligation to ensure that they, their coworkers, and their subordinates never engage in sexual harassment, even unintentionally.

B.     Forms of Sexual Harassment.

1.      Quid pro quo sexual harassment occurs when a harasser asks or forces an employee to perform sexual favors to keep a job or avoid negative consequences.

2.      Hostile work environment sexual harassment is more subtle.

a.      Hostile work environment sexual harassment occurs when organizational members are faced with an intimidating, hostile, or offensive work environment because of their sex.

b.      A hostile work environment interferes with workers’ ability to perform their jobs effectively and has been deemed illegal by the courts.

C.     Steps Managers Can Take to Eradicate Sexual Harassment.

1.      Develop and clearly communicate a sexual harassment policy endorsed by top management.

2.      Use a fair complaint procedure to investigate charges of sexual harassment.

3.      When it has been determined that sexual harassment has taken place, take corrective actions as soon as possible.

4.      Provide sexual harassment education and training to organizational members, including managers.

5.      Du Pont, Corning, Digital Equipment, and the U.S. Navy are examples of companies proactively addressing the sexual harassment problem.