Business Ethics & Sustainability

Topic – 4
Managerial and Organizational Ethics
 LEARNING OUTCOMES
• LO2: Demonstrate an ability to develop, and clearly articulate an
informed ethical position on business issues
 OUTLINE
• Ethics Issues Arise at Different Levels
• Managerial Ethics and Ethical Principles
• Managing Organizational Ethics
• Best Practices for Improving an Organization’s Ethics
• Moral Decisions, Managers, and Organizations
Ethics Issues Arise at Different Levels
Ethics Issues Arise at Different
Levels
Managerial Ethics and Ethical Principles
Managing Organizational Ethics
Managing Organizational Ethics
 Factors Affecting the
Organization’s Moral Climate
• Although there is some variation in the rankings of the three studies,
several findings are worthy of note:
• Behavior of superiors was ranked as the primary influence on unethical
behavior in all three studies. In other words, the influence of bosses is
powerful.
• Behavior of one’s peers was ranked high in two of the three studies. People
do pay attention to what their peers are doing and expecting.
• Industry or professional ethical practices ranked in the upper half in all three
studies. These contextual factors are influential.
• Personal financial need ranked last in all three studies. But let’s not assume it
does not matter because for some people it does.

• Other behaviors of one’s superiors and/or peers that create a questionable organizational culture include:
Unethical acts, behaviors, or
practices.
Acceptance of legality as a
standard of behavior.
“Bottom-line” mentality and
expectations of loyalty and
conformity.
Absence of ethical
leadership.
Objectives and evaluation
systems that overemphasize
profits.
Insensitivity toward how
subordinates perceive
pressure to meet goals.
Inadequate formal ethics
policies.
Amoral decision making.
Factors Affecting the
Organization’s Moral Climate
• Some managers simply are not ethical themselves, and this influence wears off on others. Employees watch
their superiors’ behavior carefully and take cues from them as to what is acceptable.
• Some managers think that if they are strictly abiding by the law, they are doing the most they ought to do.
• This focus places little value on doing what is right and on being sensitive to other stakeholders.
• This is a global indicator of sorts that includes some of the other points already mentioned. In addition, management never steps
out ahead of the pack and assumes a leadership role in doing what is right. This reflects an absence of moral management.
• If management sets unrealistic goals or does not take ethics into consideration in evaluating employees, it is
creating a potentially destructive environment.
• This is related to several of the previous points. Management must be constantly vigilant of the directives and expectations it is
making on employees. The manager might always ask, “How might this goal, directive, or expectation be misread or
misunderstood in terms of how far I want people to go to achieve it?”
• Problems here might include inadequate management controls for monitoring and compliance, unreasonable
reimbursement/expense policies, and the absence of a clear code of conduct.
• This includes managers who themselves fail to factor ethical considerations into their actions, decisions, and
behaviors. The result of this is a vacuous leadership environment
Improving the Organization’s
Ethical Culture
• Compliance versus Ethics Orientation.
• An ongoing discussion today is whether a
compliance orientation or an ethics orientation
should prevail in companies’ ethics programs.
• Several concerns articulated about a
compliance focus have been identified.
• First, a pure compliance focus could undermine the
ways of thinking or habits of mind that are needed in
ethics thinking.
• Second, it has been argued that compliance can
squeeze out ethics.
• Third, the issue of “false consciousness” has been
raised.
Best Practices for Improving an
Organization’s Ethics
 Best Practices for Improving an
Organization’s Ethics
• Figure 8-5 summarizes a number of best
practices for creating such an ethical
organization.
 Best Practices for Improving an Organization’s Ethics:
Top Management Leadership
(Moral Management)
• Figure 8-8 summarizes the elements that ought to exist in companies’ ethics programs in order to comply with the
U.S. Sentencing Commission’s Organizational Guidelines.
Compliance Standards. • Companies are expected to have established compliance standards, which are a key part of detecting and preventing violations of the law.

High-Level Ethics • Companies must assign compliance and ethics programs to senior executives. This person, perhaps called an ethics officer, must have the
Personnel. authority, responsibility, and resources to achieve ethics goals.

Avoidance of Delegation • Companies have a responsibility to make sure they do not delegate undue discretionary authority (e.g., access to company funds, investor
of Undue Discretionary
Authority. information, authority to bind the company to contracts) to individuals who cannot be trusted with such authority.

• Standards and procedures must be effectively communicated. The company has a responsibility to make sure all personnel are aware of
Effective
Communication. ethics codes, standards, policies, and practices. One major way to achieve this communication is through the conduct of ethics training
programs.

Systems for Monitoring,

Auditing, and Reporting.
• Companies are expected to have systems and procedures in place for assessing compliance.

• Companies are expected to have systems in place to ensure the consistent enforcement of compliance standards. The purpose here is to
Enforcement.
make sure that everyone is following standards. A high-level executive cannot be treated differently than a low-level executive.

Detecting Offenses, • Once an offense has been detected, several actions need to happen. If there is an actual violation of the law, the company is expected to
Preventing Future self-report the offense and actions taken to resolve the issue. The company needs to take further reasonable measures to prevent a similar
Offenses. offense from occurring in the future.

Keeping Up with • Companies are expected, through ethics offices or programs, to keep up with industry practices and standards. This can be done by
Industry Standards. membership in national or local organizations.
Moral Decisions, Managers, and
Organizations
 Moral Decisions, Managers, and
Organizations
Figure 8-8 depicts the sequencing and goals of each of these levels.
REFERENCE
 REFERENCE

• Archie B. Carroll, J. A. B., & Buchholtz, A. K. (2018). Business & Society:

Ethics, Sustainability, and Stakeholder Management (10th ed.).
Cengage Learning.