The Man in the Mirror:

Sebastian’s Dilemma
KSOM
What should he do? And why? What he did and why?
• Do Nothing • Took action
– Why? …….. – Justification
• Exploit the situation – As individual
– Why? – As economic agent
– As a company leader
• Take action
– As boundary spanner
– Why?

BECSR: 2021-23 Moral Development 1

 What Should Sebastian Do?
Do Nothing – Resign & Go Home
KSOM
Approaches to Ethics
Spheres of Executive Responsibility

Utilitarian Rights Fairness Common Virtue

Approach Approach or Justice Good Approach
Approach Approach
Private √
Individual_ X
Economic Agent √
?
Company √ √
Leader ?
Responsibilities √
outside the
firm?
What should Sebastian do? Do nothing? Exploit the situation? Take action?

BECSR: 2021-23 Moral Development 2

 What Should Sebastian Do?
Exploit the Situation- Sign & Bargain for Favours
KSOM
Approaches to Ethics
Spheres of Executive Responsibility

Utilitarian Rights Fairness Common Virtue

Approach Approach or Justice Good Approach
Approach Approach
Private √
Individual_ X
Economic Agent √
?
Company √ √
Leader ?
Responsibilities √
outside the
firm?
What should Sebastian do? Do nothing? Exploit the situation? Take action?

BECSR: 2021-23 Moral Development 3

 What Should Sebastian Do?
Take Action – Expose the Corruption
KSOM
Approaches to Ethics
Spheres of Executive Responsibility

Utilitarian Rights Fairness Common Virtue

Approach Approach or Justice Good Approach
Approach Approach
Private √
Individual_ √
Economic Agent √
√
Company √ √
Leader √
Responsibilities √
outside the
firm√
What should Sebastian do? Do nothing? Exploit the situation? Take action?

BECSR: 2021-23 Moral Development 4

 The Man in the Mirror:
The Real details- 2010 event
KSOM
• Sebastian: Lieutenant-Colonel Ian Foxley
• Sumeria: Saudi Arabia
• EuroCorp: EADS, based in Holland, Europe's biggest
defense and aerospace company, maker of Airbus
• MidCo: GPT
• Martin: Mike Paterson
• Sequel: Ian Foxley was dismissed from his job, lost in
the court, didn’t get a job in his area of expertise,
worked for an IT Start up

BECSR: 2021-23 Moral Development 5

 Another Incidence of Questionable
Deal: The Bofors’ Howitzer Gun
KSOM
• Sten Lindstrom, former chief of Swedish police, leaked the
documents to Chitra Subramaniam Duella
• Kickbacks paid in a US$1.4-billion deal between the Swedish
arms manufacturer Bofors with the government of India for
the sale of 410 field howitzer guns – 155mm (24.03.1986)
• Defeat of Gandhi's ruling Indian National Congress party in
the November 1989 general elections.
• Company went bankrupt
• It has left shadow of fear among honest decision makers
resulting in delay in upgrading Indian military capabilities-
greater harm for a greater number of people, the nation!

BECSR: 2021-23 Moral Development 6

 Moral Development
KSOM
• Objective
– Gain insights into the processes for individual and
corporate moral development
• Intended learning outcomes
– Identify your stage of moral development and
work towards progressing to the desired stage
– Identify the stage of corporate moral development
of a typical organization and develop perspectives
to graduate to a desired stage ►

BECSR: 2021-23 Moral Development 7

 Moral Behavior ← Moral Development:
Four Component Processes
KSOM
1.Moral sensitivity: Interpreting the situation &
identifying a moral problem [empathetic concern]
2.Moral Judgment: Figuring out what one ought to do &
formulating a plan of action that applies the relevant
moral standards/ ideal [defining issue test- P Score]
3.Moral Motivation: Evaluating how the various courses
of action serve moral or non-moral values and deciding
which action a person will actually attempt to pursue
[perspective taking – Rokeach Value Survey]
4.Moral Character/ Implementation: Implementing the
moral course of action [conscientiousness- Big5]►
BECSR: 2021-23 Moral Development 8
 Moral sensitivity
KSOM
Interpersonal Reactive Index
• receptivity to social situations, and being able
to interpret the situation in terms of what
actions are possible, the impact of those
actions on others, and the reactions of others
to one’s actions ↓
• Empathy - Interpersonal Reactivity Index (IRI)
consisting of four seven-item subscales►

BECSR: 2021-23 Moral Development 9

 empathetic concern
Interpersonal Reactivity Index (IRI)
A=0, B=1, C=2, D=3, E=4

( ): A=4, B=3, C=2, D=1, E=0

KSOM
The perspective The empathic The personal The fantasy (FS)
taking (PT) concern (EC) distress (PD)

#Q Choice Score #Q Choice Score #Q Choice Score #Q Choice Score

(3) 2 6 1
8 (4) 10 5
11 9 (13) (7)
(15) (14) 17 (12)
21 (18) (19) 16
25 20 24 23
28 22 27 26

EC& PD: Affective Empathy PT & FS: Cognitive Empathy

BECSR: 2021-23 Moral Development 10

 Interpersonal Reactivity Index:
Sensitive to the feelings of others
KSOM
• The Perspective-Taking tendency to spontaneously adopt
the psychological point of view of others
• Fantasy scale taps respondents' tendencies to transpose
themselves imaginatively into the feelings and actions of
fictitious characters in books, movies, and plays.
• The Empathic Concern scale assesses 'other-oriented'
feelings of sympathy and concern for unfortunate others
• Personal Distress scale measures 'self-oriented' feelings
of personal anxiety and unease in tense interpersonal
settings

BECSR: 2021-23 Moral Development 11

 Moral Judgment
The Defining Issue Test- “P” Score
KSOM
• it emphasizes the role of cognition;
• it highlights the personal construction of the
epistemological categories;
• it portrays change over time in terms of
development; and
• it characterizes the developmental change of
adolescents and adults in terms of a shift from
conventional to post-conventional moral
thinking►
BECSR: 2021-23 Moral Development 12
 Lawrence Kohlberg’s
KSOM
Theory of Moral Development

BECSR: 2021-23 Moral Development 13

 Scoring:
The Defining Issues Test
KSOM
P SCORE
Importance
2nd
Most Most 3rd Most4th Most
The Escaped
Prisoner
The Doctor’s
Dilemma
The Newspaper

1&2 3&4 5&6

Count:

BECSR: 2021-23 Moral Development 14

 Moral Motivation
KSOM
Rokeach Value Survey
Motivation to select moral value over other values
• Terminal values-
– Self focused- personal values
– Others focused- social values
• Instrument values
– Violation results in guilt- moral values
– Violation results in shame about personal
inadequacy- self-actualization values►

BECSR: 2021-23 Moral Development 15

 Moral Character
KSOM
20 item Scale- Conscientiousness
• self-confidence, self-efficacy, perseverance, and
tenacity in being able to work around problems and
unexpected difficulties in implementing the desired
course of action
• Conscientiousness- governed by or confirming to the
dictates of conscience’’ i.e., ‘‘the sense of moral
goodness or blameworthiness of one’s own conduct,
intentions, or character together with a feeling of
obligation to do right or be good►

BECSR: 2021-23 Moral Development 16

 Components of
Individual Moral Development
KSOM
• Ethical sensitivity: the individual must be able to identify
a moral dilemma ⇓
• Ethical judgment: the individual forms a judgment on the
ideal solution to the moral dilemma ⇓
• Ethical intention (motivation): the individual’s intention
to comply or not comply with the ideal solution is formed
⇓
• Ethical behaviour (action): the individual develops the
courage to follow through with his/her moral action.
Let’s relate it to Sebastian

BECSR: 2021-23 Moral Development 17

 Karma-Yoga:
Indian Model of Moral Development
KSOM

(The Technique of
Intelligent Action)

☼
☼
☼
☼
Karma
Theory

Salvation
☼ ☼ ☼
(Mukti) Soul
(Atman)
Indian
BECSR: Worldview
2021-23 Moral Development 18
 Executive Ethical Leadership:
the Two Pillars
KSOM
Moral Person [tells followers Moral Manager [tells followers
how leader behaves] how they should behave &
holds them accountable]
• Traits • Role modelling
– Honesty
– Takes visible ethical decision
– Integrity
– Trust • Reward discipline
• Behaviours – Holds people accountable for
– Openness ethical conduct
– Concern for people • Communicating
– Personal mastery
– Sends an “ethics and values”
• Decision making message
– Value based
– Fair

BECSR: 2021-23 Moral Development 19

 Executive Ethical Leadership:
Reputation Matrix
KSOM

BECSR: 2021-23 Moral Development 20

 Role of Corporate Culture in
Moral Development
KSOM
• Shared values and beliefs about what is right
and what is wrong
• Principal sources of cultural beliefs are from
– Individuals, top management in particular
– Reinforcing effect of organization’s success in
problem solving & achieving objectives
• Moral development of the culture►

BECSR: 2021-23 Moral Development 21

 A Model of
Corporate Moral Development►
KSOM
Balanced
Concern

Stage 5:
Stage 4: Ethical ►
Emerging
Stage 3: ► Ethical
►
Responsive
Stage 2:
Un-Balanced
Legalistic ►
Concern
Stage 1:
Amoral ►

BECSR: 2021-23 Moral Development 22


KSOM
1. Not all organizations
pass thru all stages
2. An organization can
begin in any stage
3. Most organizations in
stage 1 do not leave
stage 1
4. Organization with
multiple SBUs can
occupy different stages
BECSR: 2021-23 Moral Development
Propositions
5. Co. Moral
development doesn’t
have to be a
continuous process
6. Regression is possible
7. No time dimension
8. Two organizations in 1
stage can differ in level
of advance►
23
 Stage I:
The Amoral Organization
KSOM
• Management Attitude and Approach: Get away with all
you can; It’s ethical as long as we’re not caught; Ethical
violations, when caught, are a cost of doing business.
• Ethical Aspects Corporate Culture: Outlaw culture; Live
hard and fast; Damn the risks; Get what you can and get
out.
• Corporate Ethics Artifacts : No meaningful code of ethics
or other documentation; No set of values other than
greed.
• Defining Corporate Behavior: Film Recovery Systems
(FRS) ►

BECSR: 2021-23 Moral Development 24

 Stage II:
The Legalistic Organization
KSOM
• Management Attitude and Approach: Play within the legal rules;
Fight changes that effect your economic outcome; Use damage
control through public relations when social problems occur; A
reactive concern for damage to organizations from social
problems.
• Ethical Aspects Corporate Culture: If it’s legal, it’s OK; Work the
gray areas; Protect loopholes and don’t give ground without a
fight; Economic performance dominates evaluations and
rewards.
• Corporate Ethics Artifacts : The Code of Ethics, if it exists, is an
internal document, “Don’t do anything to harm the
organization”, “be an good corporate citizen”.
• Defining Corporate Behavior: Ford Pinto►
BECSR: 2021-23 Moral Development 25
 Stage III:
The Responsive Organization
KSOM
• Management Attitude and Approach: Management understands
the value of not acting solely on a legal basis, even though they
believe they could win; Management still has a reactive mentality;
A growing balance between profits and ethics, although basic
premise, still may be a cynical “ethics pays”; Management begins to
test and learn from more responsive actions.
• Ethical Aspects Corporate Culture: There is a growing concern for
other corporate stakeholders other than owners; Culture begins to
embrace a more “responsible citizen” attitude.
• Corporate Ethics Artifacts : Codes are more externally oriented and
reflect a concern for other publics; Other ethics vehicles are
undeveloped.
• Defining Corporate Behavior: P & G (Rely Tampons), Abbott Labs,
Borden ►
BECSR: 2021-23 Moral Development 26
 Stage IV:
The Emerging Ethical Organization
KSOM
• Management Attitude and Approach: First stage to exhibit an active
concern for ethical outcomes; “We want to do the ‘right thing”; Top
management values become organizational values; Ethical perception
has focus but lacks organization and long term planning; Ethics
management is characterized by successes and failures.
• Ethical Aspects Corporate Culture: Ethical values become part of
culture. These core values provide guidance in some situations but
questions exist in others; A culture that is less reactive and more
proactive to social problems when they occur.
• Corporate Ethics Artifacts : Codes of Ethics become action documents;
Code items reflect the core values of the organization; Handbooks,
Policy statements; committees, ombudsmen are sometimes used.
• Defining Corporate Behavior: Boeing, General Mills, Johnson &
Johnson (Tylenol), General Dynamics, Caterpillar, Levi Strauss ►
BECSR: 2021-23 Moral Development 27
 Stage V:
The Ethical Organization
KSOM
• Management Attitude and Approach: A balanced concern for
ethical and economic outcomes; Ethical analysis is a fully integrated
partner in developing both the mission and strategic plan; strategic
analysis is used to anticipate problems and analyze alternative
outcomes.
• Ethical Aspects Corporate Culture: A total ethical profile, with
carefully selected core values which reflects that profile, directs the
culture; Corporate culture is planned and managed to be ethical;
Hiring, training, firing and rewarding all reflect the ethical profile.
• Corporate Ethics Artifacts : Documents focus on the ethical profile
and core values; All phases of organizational documents reflect
them.
• Defining Corporate Behavior: Infosys/ Wipro ►

BECSR: 2021-23 Moral Development 28

 Role of Corporate Culture in
Moral Development
KSOM
• Shared values and beliefs about what is right
and what is wrong
• Principal sources of cultural beliefs are from
– Individuals, top management in particular
– Reinforcing effect of organization’s success in
problem solving & achieving objectives
• Moral development of the culture►

BECSR: 2021-23 Moral Development 29

 A multisystem ethical culture
framework
KSOM

BECSR: 2021-23 Moral Development 30

 Next Class
KSOM
• Case study: Decency Means More than “Always Low
Prices”: A Comparison of Costco to Wal-Mart’s Sam’s
Club
• Discussion questions:
– Difference in performance?
– Causes for difference in performance?
– Ethical reasoning/ justifications for the approaches to
business leading to superior performance [relate to
individual & corporate moral development and culture &
leadership)

BECSR: 2021-23 Moral Development 31