CHAPTER 6 :MANAGERIAL

AND ORGANIZATIONAL
ETHICS

Group 2
6.1What is Managerial and
Organizational Ethics:
MANAGERIAL ETHICS, IS WHEN THERE IS A SET
OF PRINCIPLES THAT IS DICTATED BY UPPER
MANAGEMENT TO DEFINE WHAT IS RIGHT AND
WRONG BEHAVIOR IN THE ORGANIZATION.

ORGANIZATIONAL ETHICS: REPRESENTS THE

ORGANIZATIONS ETHICAL STANDARDS,
CULTURE, MORALE AND WORK ENVIRONMENT.

THUS, MANAGERS ENCOUNTER DAY-TO-DAY

CHALLENGES IN SUCH AREA’S:

SEXUAL HARASSMENT
CONFLICTS OF INTEREST
CUSTOMER DEALINGS AND
PRESSURE TO COMPROMISE ON PERSONAL
NEEDS

HENCE, ETHICS IS EXTREMELY SIGNIFICANT TO

A BUSINESS SUCCESS.
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• 6.1 ETHICS ISSUES ARISE AT DIFFERENT
LEVELS:
• Should I report the actual overtime I spent on this project, hoping to get
additional recognition or extra pay?
THERE ARE FOUR LEVELS:
• Let’s talk about the Bil Mar Plant situation
PERSONAL LEVEL- THIS IS WHERE WE FACE
PERSONAL SITUATIONS IN OUR DAILY LIVES • In this case, four misconducts were carried:
OUTSIDE THE ARENA OF OUR EMPLOYMENT.
FOR EXAMPLE: - Intimidating behaviour towards staff employees and members
SHOULD I CHEAT ON MY INCOME TAX RETURN - Misreport on actual time or hours worked
BY OVERINFLATING MY CHARITABLE
CONTRIBUTIONS? OR - Misleading and lying to the employees, customers, vendors and public
servants.
SHOULD I DOWNLOAD MUSIC FROM THE
INTERNET EVEN THOUGH I REALIZED THAT IT - Withholding compulsory information form employees, customers,
IS SOMEONE ELSE’S INTELLECTUAL PROPERTY? vendors or the public in specific.

MANAGERIAL AND ORGANIZATIONAL LEVELS:

. SITUATIONS FACED BY MANAGERS AND
EMPLOYEES AT THEIR WORKPLACE.
FOR EXAMPLE:
SHOULD I SET A HIGH PERFORMANCE FOR MY
TEAM JUST TO BENEFIT THE COMPANY, EVEN
THOUGH IT MAY CAUSE CUT THE CORNERS TO
ACHIEVE SUCH A GOAL?
- Industry or Profession Level:
It is where the manger or organization might face ethical issues at an
industry or professional level. For example:
Is it ethical for accountants to allow a restatement of earnings that can
cause investors to lose money and confidence in the market?
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6.1 ETHICS ISSUES ARISE AT DIFFERENT
LEVELS
This is where managers
act out in concert
Societal and Global through their companies
And the last level is:
Standards: and industries to bring
about constructive
change.

For example:
discrimination

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6.2 MANAGERIAL ETHICS AND ETHICAL PRINCIPLES
• Managerial Ethics
• Employees in leadership positions use moral
principles to direct their activities and behaviors.
• These morals could be personal or connected to the
principles and ideals of the organization.
• They assist managers in determining what is
appropriate and inappropriate at work so they can
foster a friendly, inclusive environment.

• Principles approach to ethics?

• The principles approach to ethics is built on the
concept that staff members and managers want a
solid foundation for their decisions and actions than
what the standard method offers.

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6.3 PRINCIPLES APPROACH TO ETHICS
An Ethics Principle? Types of Ethical
• Universal principles of right and
wrong that outline the types of
Principles or Theories
actions that a moral business or 1. Teleological Theories
individual should and should not 2. Principle of Utilitarianism
undertake.
• These guidelines not only help you
3. Principle of Rights
make judgments, 4. Ethics of Care
• But they also create the standards 5. Virtue Ethics
by which other people will evaluate
your choices. 6. Servant Leadership
7. The Golden rule

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6.4 ETHICAL TESTS APPROACH TO DECISION MAKING

• The ethical tests are more

practical or hands-on in
orientation and do not require
the depth of moral thinking
that the principles do.

• Aim: to provide useful

guidance that helps the
decision maker decide
whether the course of action,
practice, or decision should
be pursued or not.

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6.4 TYPES OF ETHICAL TESTS
No single test is foolproof, but each should be helpful.

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6.4 USE SEVERAL TESTS IN COMBINATION
• None of the tests alone provide a perfect
method into determining whether a
decision, act or practice is ethical or
unethical.
• Thus, If several tests are used in
combination, especially the more powerful
ones, they do provide a means of
practically examining proposed actions
before engaging in them.

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6.4 PHILIP LEWIS – DECISION MAKER PROCESS:

• Look at the from the position of other person(s)

affected by a decision
• Try to determine what virtuous response is expected
• Ask :
a) how it would feel for the decision to be
disclosed to a wide audience
b) whether the decision is consistent with the
organizational goals
• Act in a way that is:
a) right and just for any other person in a similar
situation
b) good for the organization.

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 6.6 BEHAVIORAL ETHICS – ACHIEVING A
DEEPER UNDERSTANDING
• Behavioral ethics helps us to understand at a
deeper level many of the behavioral processes
that research has shown are taking place in
people and organizations.
• Bazerman and Gino have defined behavioral
ethics as “the study of systematic and predictable
ways in which individuals make ethical decisions
and judge the ethical decisions of others that are
at odds with intuition….”
• Behavioral ethics gives us insights into how
people actually behave in organizations because
of psychological processes or because of
organizational factors at work.

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6.6 BEHAVIORAL ETHICS PHENOMENA
Tends to occur when managers and employees find that
even when they aspire to behave ethically it is difficult
Bounded Ethically due to a variety of organizational pressures and
psychological tendencies that intervene.

This is the tendency people must take their cues for ethical behavior
Conformity Bias from their peers rather than exercising their own independent ethical
judgment.

This is the tendency for people to be more confident of their own moral character or
Overconfidence Bias behavior than they have objective reason to be.

This is the propensity people have to process information in a way that

Self-serving Bias serves to support their pre-existing beliefs and their perceived self-
interest.

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6.6 BEHAVIORAL ETHICS PHENOMENA
Refers to the fact that people’s ethical judgments are
Framing affected by how a question or issue is posed (framed).

Incrementalism Is the predisposition toward the slippery slope.

The tendency some people have to use different ethical standards as they move through
Role Morality different roles in life.

This is the penchant for people to keep an ethical scoreboard in their heads and use this
Moral Equilibrium information when making future decisions.

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6.6 FIVE BARRIERS TO AN ETHICAL ORGANIZATION

Ill-conceived goals
Motivated blindness
Indirect blindness
Slippery slope
Overcoming values

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6.8 MORAL DECISIONS, MORAL MANAGERS, AND MORAL ORGANIZATIONS
“The depths of a company’s cultural commitment to ethical values in the pursuit of economic values are a mark of corporate moral development.” – Kenneth Goodpaster

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6.7 TOP MANAGEMENT
LEADERSHIP
 The moral tone of a business is set by top
management. They provide the structure
and the organizations conscience.
 Researcher D.M. Mayer, “leaders set the
tone of the organization by enacting
practices, policies and procedures that
help facilitate the display of ethical
behavior and reduce the likelihood of
misconduct.”
 Strong ethical leadership vs weak ethical
leadership.
 Good leaders are honest, trustworthy and
hold a standard of integrity.
 Two Pillars of leadership are:
Moral person and Moral manager.
Moral person requires 3 major attributes:
1. Traits 2. Behaviours 3. Decision making
Moral Manager:
1. Role Model 2. Communicates about ethics
and values. 3. Uses rewards and discipline to
employees effectively.
6.7 EFFECTIVE COMMUNICATION OF
ETHICAL MESSAGES
• 3 Important communication principles for
business leader :
• 1. Candor: Honest, sincere and fair from
prejudice.
• 2. Fidelity: Accurate and descriptive,
avoids deception and exaggeration.
• 3. Confidentiality: Exercises care in
deciding what information to disclose
with employees.
• Ethics and Compliance Programs and
Officers:
 Organizations have departments or units
assigned with monitoring and improving
ethics in the workplace.
 Programs include: Code of conduct,
ethical training, systems in place to
discipline violators and ethical
performance evaluations
6.7 OBJECTIVES AND DECISION
MAKING
Setting realistic objectives: • Ethical Decision-making processes:
 Setting realistic targets and goals that can  Goes hand in hand with management
be achieved with the current business
practices is very important in making sure  Involves stating the problem, analysing
employees don’t feel pressure to break the problem identifying action plans and
ethical conduct to meet the managers implementing them.
targets.
6.7 ETHICS SCREEN:

• Ethics Quick Test:

• Is the action legal?
• How will it look in the newspaper?
• Does it comply with your values?
• If you’re not sure, ask.
 6.7 CODES OF ETHICS OR CONDUCT

 Document that introduces concept of ethics and

compliance
 Clarifies and overview of what is meant by ethical
business conduct
 Sets of Standards of behavior
 Other codes are designed around stakeholders while
others are around issues
 Management Responsibility
 It must be communicated effectively with all stakeholders
6.7 CODES OF ETHICS OR CONDUCT (CTD.)

Contents may address the following:

 Employment Practices
 Employees
 Clients
 Vendor Information
 Public Information/Communication
 Conflict of interests
 Relationship with Vendors
 Environmental Issues
 Ethical Management Practices
 Political Involvement
 Global Issues
o Relationship with other firms, communities and governments
6.7 DISCIPLINING VIOLATORS OF ETHICS STANDARDS

 Management must effectively communicate their

ethics standard clearly and convincingly before
taking disciplinary action
 Management must discipline violators of ethical
norms and standards (Without favour and/or
prejudice)
 Organisations needs to respond forcefully to
individuals who have been found guilty for
violating its code of ethics
 Equally, good ethical behavior needs to be rewarded
6.7 ETHICS “HOTLINES” AND WHISTLE-BLOWING MECHANISMS

 The most frequent way in which employees report

on fraud or related infractions.
 Hotlines may be via telephone, web or email based
Fraud Reporting
(Association of Certified Fraud Examiners)

31%
38%

14%

17%
Anonymous Tips Management Reviews Management Audits Other
6.7 ETHICS “HOTLINES” AND WHISTLE-BLOWING
MECHANISMS (CTD.)

Advantages
 The mechanisms provides a platform for employees
and other stakeholders to report on wrongdoing with
anonymity
 They are typically used without alerting anyone in
management about the problem ahead of time.
 Helps in avoiding covering up on unethical acts
Disadvantages
 May do a lot of damage/harm to employee
morale, especially in cases whereby:
• Reported wrongdoings are false accusations
• The company does not handle issues
reported with caution and carefully
6.7 BUSINESS ETHICS TRAINING

Goals of Ethics Training:

 To learn the fundamentals of business ethics
 To learn to solve ethical dilemmas
 To learn to identify causes of unethical behavior
 To learn about common managerial ethical issues
 To learn whistle-blowing criteria and risks
 To learn to develop a code of ethics and execute an
internal ethical audit
6.7 ETHICS AUDITS AND RISK ASSESSMENTS

Definition:
 Mechanism/Approach by which a company may
assess or evaluate its ethical climate or programs
Purpose:
 Review ethics initiatives, i.e., ethics programs,
code of conduct, hotlines, ethics training programs
 Identify gaps that may exist between the original
intent and the implementation
 To examine other management activities that may
add to or subtract from the company’s ethics
initiatives.
6.7 CORPORATE TRANSPARENCY

Definition:
 Transparency is the degree to which an
organization provides public access to
information; accepts responsibility for its actions;
makes decisions more openly; and establishes
incentives for leaders to uphold these standards.
Three characteristics dominating the concept
of transparency:
 Openness,
 Ongoing Communication,
 Accountability
 6.7 BOARD OF DIRECTORS OVERSIGHT AND LEADERSHIP

Board’s Role:
 A board of directors should
determine the elements that must be
embedded in the company’s moral
DNA
 Strong leadership from the board and
CEOs remains the most powerful
force in improving the company’s
ethical culture
THANK YOU