THE INDIVIDUAL IN THE ORGANIZATION

CORPORATION AND CORPORATE SOCIAL RESPONSIBILITY

THREE MODELS OF ORGANIZATION

1. RATIONAL STRUCTURE 2. POLITICAL STRUCTURE 3. NETWORK OF PERSONAL RELATIONS

THE RATIONAL ORGANIZATION

This is the traditional model of business organization. an organization is the rational coordination of the activities of a number of people for the achievement of some common explicit purpose or goal, through division of labor and function and through a hierarchy of authority and responsibility. (E.H. Schein)

RATIONAL ORGANIZATION
Most fundamental realities of the organization are the formal hierarchies of authority identified in the organizational chart and lines of authority in the organization. Board of Directors
President VP Research VP Manufacturing VP Marketing

RATIONAL ORGANIZATION
What holds together the many layers of employees and managers and fixes these people onto the organizations goals and formal hierarchy? Contracts. With contractual agreements, employee has moral responsibility to obey employer in pursuing organizations goals, and the organization in turn has moral responsibility to provide employee with economic supports it has promised.

EMPLOYEES OBLIGATIONS TO THE FIRM

Main moral duty: to work towards the goals of the firm and to avoid activities which might harm those goals. Unethical: to deviate from these goals to serve ones own interests.

EMPLOYEES OBLIGATION TO T HE FIRM

Ways in which employee might fail to live up to duty of pursuing goals of the firm: Acting on conflict of interest Stealing from the firm Using ones position as leverage to force illicit benefits out of others through extortion or bribery.

Conflicts of Interest
Conflicts of interest arise when employee is engaged in a task on behalf of the company and employee has private interest in the outcome of the task (a) that is possibly antagonistic to the best interests of the firm, and (b) that is substantial enough to affect the independent judgment the firm expects the employee to exercise on its behalf. Simply put, conflicts of interest arise when selfinterest of employees in positions of trust leads them to discharge their offices in ways that may not be in the best interests of the firm.

Conflicts of Interest
E.g. officer of corporation holds stock in one of the companies submitting bids for construction contract. E.g. daughter-in-law is saleswoman for firm that manufactures tools that my company purchases even if other firms offer better terms. E.g. accountant working for insurance company also provides independent auditing for some of the firms the insurance company insures.

Conflicts of Interests
Conflicts of interest may be actual or potential. Actual conflicts of interest are unethical because they are contrary to the implied contract worker freely accepts when taking the job. Potential conflicts of interest may or may not be unethical depending on probability that employees judgment will be affected Conflicts of interest can be created by bribes and extortion, and gifts.

Conflicts of interest
A commercial bribe is a consideration given or offered to an employee by a person outside the firm with the understanding that when the employee transacts business for his or her own firm, the employee will deal favorably with that person or with the persons firm. Commercial extortion is when employee demands a consideration from persons outside the firm as a condition for dealing favorably with those persons when employee transacts business for his or her firm.

Conflicts of interest
Accepting gifts may or may not be ethical. Factors to be considered in evaluating the morality of accepting a gift (Vincent Barry): 1. What is the value of the gift? Substantial enough to influence ones decisions? 2. What is the purpose of the gift? Intended as a bribe? . 3. What are the circumstances under which the gift was given? Given openly? To celebrate a special event?

Conflicts of interest
4. What is the position of the recipient of the gift? In a position to influence the firms dealings with the giver? 5. What is the accepted business practice in the area? Part of an open and well-known industry practice? 6. What is the company policy? 7. What is the law?

Employee Theft
Employee has contractual agreement to accept only certain specified benefits in exchange for his labor and to use resources and goods of the firm in pursuit only of the legitimate aims of the firm. Therefore, to appropriate additional benefits for oneself or to convert company resources to employees own use are forms of theft.

Employee Theft
E.g. stealing office supplies, tools, clothing E.g. padding expense accounts E.g. embezzlement, larceny, fraud in handling of trusts or receiverships, forgery. Immorality of such thefts is clear. What is not clear always are thefts involving various forms of information.

Employee Theft Computer Theft

What is the ethics of using computer to gain entry into companys data bank, copying companys computer programs, using company computer during ones own time, using or copying companys computerized data? Unless authorized explicitly or through the companys formal or informal policies, all such activities are unethical forms of theft since they all involve taking or using property that belongs to someone else without the consent of its rightful owners.

Employee Theft: Computer Theft

Computer theft best understood by considering nature of property: property consists of bundle of rights that attach to some identifiable asset: Right to exclusive use of asset Right to decide whether and how others may use the asset Right to sell, trade, or give away the asset Right to any income generated by the asset Right to modify or change the asset.

Employee Theft Trade Secrets

Trade secrets or propriety information consists of nonpublic information such as 1) the firms activities, technologies, future plans, policies, or records which if known by competitors would affect the firms ability to compete 2) owned by company (even if not patented or copyrighted) because developed by company or purchased for its private use 3) those explicitly indicated by the firm that it does not want anyone outside to have the information.

Employee Theft Trade Secrets

Use of trade secrets by employees for their own advantage is unethical because it is using property of another agent for a purpose not sanctioned by that other agent. But the skills an employee acquires by working for a company do not count as trade secrets. It is not easy though to distinguish skills from trade secrets. The firms property rights over trade secrets are limited by rights of other agents, such as right to know health risks associated with their job.

Insider Trading
the act of buying and selling a companys stock on the basis of inside information about the company. Inside or insider information about a company is confidential, not available to general public but which would have material or significant impact on the price of the stock. Is insider trading ethical or unethical?

Insider Trading
Arguments of those who consider insider trading not unethical but actually socially beneficial: 1) When insiders trade stocks on their inside information, they in effect bring their information to the market and ensuring market value of stocks accurately reflect their true underlying value. 2) Insider trading does not harm anyone. People sell their stocks because they need or want the money at the moment, and they will get the current market price of their stock. And when price of stock rises due to insider buying, the people who will sell their stocks during this period get more.

Insider Trading
3) Untrue that insider has unfair advantage over others because the fact is that many people who buy and sell stocks have more or better information than others. Nothing unethical or unfair about having an information advantage over others in the stock market.

Insider Trading
Arguments why insider trading is unethical: 1) The information that insider trader uses is information that does not belong to him but to shareholders, and therefore an act of stealing. 2) The information advantage of insider is unfair or unjust. Unfair because it is unjustly stolen from others (unlike information advantage of stock experts or analysts)the company owners who made the investments.

Insider Trading
3) Untrue that insider trading harms no one. Effects of insider trading: i) tends to reduce the size of the market, and with reduced market, a) decline in the liquidity of stocks because it is harder to find buyers and sellers for stock, b) increase in the variability of stock prices, c) decline in markets ability to spread risk because of few parties, d) decline in market efficiency, e) decline in utility gains available to traders.

Insider Trading
ii) increases the cost of buying and selling stocks in the market (i.e. transaction cost) because the more insiders there are, the more specialist must raise his fees. Thus, reasons to support the view that insider trading is unethical are:it violates peoples rights; it is based on unjust informational advantage; and it harms societys overall utility.

THE FIRMS DUTIES TO THE EMPLOYEE

Basic moral obligation of employer to employees: to provide them with compensation they have freely and knowingly agreed to receive in exchange for their services. Two main issues: fairness of wages and fairness of employee working conditions.

Wages
From employees point of view: wages are the principal means for satisfying basic economic needs of the worker and his family. From employers point of view: wages are a cost of production and must be kept down . Dilemma of balancing between employers interests in minimizing costs and workers interest in providing a decent living for himself and his family.

Wages
Factors to be considered in fair wage: 1. Going wage in the industry and in the area. 2. Firms capabilities 3. Nature of the job 4. Minimum wage laws 5. Relation to other salaries (salary structure) 6. Fairness of wage negotiations.

Working Conditions: Health and Safety

Risks, an unavoidable part of many occupations. Employer has duty to take steps to ensure worker is not being unfairly manipulated into accepting a risk unknowingly, unwillingly, or without due compensation. In concrete: 1. Employers should offer wages that reflect risk-premium prevalent in other similar but competitive labor markets. 2. Employer should provide employee with suitable health insurance programs. 3. Employer should collect information on the health hazards that accompany a given job and make this available to workers.

Working Conditions: Job Satisfaction

Job specialization often results in dissatisfaction and mental injury. Three determinants of job satisfaction: 1) experienced meaningfulness 2) experienced responsibility 3) knowledge of results

Working Conditions: Job Satisfaction

To influence these 3 determinants, jobs must be expanded along 5 dimensions: 1) skill variety 2) task identity: doing a job from beginning to end. 3) task significance: impact on lives of others 4) autonomy: degree to which job gives worker freedom in scheduling work, how to carry it out. 5) Feedback

Working Conditions: Job Satisfaction

In short, solution to job dissatisfaction lies in broadening job horizontally by giving employee wider variety of tasks and deepening job vertically by allowing employee more control over these tasks.

THE POLITICAL ORGANIZATION

Political model of organization sees organization as system of competing power coalitions and of formal and informal lines of communication and influence that radiate from these coalitions. What counts is power: ability of individual or group to modify the conduct of others in desired way without having ones own conduct modified in an undesired way.

POLITICAL ORGANIZATION
If power is basic reality in political organization, ethical issues focus on moral limits to the exercise of power within organization. 1) moral limits of manager over their subordinates. 2) moral limits to power employees acquire and exercise on each other.

Political Organization: Employee Rights: The Right to Privacy

The Right to Privacy: the right to be left alone, in particular the right not to have others spy on his or her private life. Positively, the right of persons to determine the type and extent of disclosure of information about themselves. This right has become vulnerable with development of recent technologies.

Right to Privacy
Two types: Psychological privacy with respect to persons inner life. Physical privacy with respect to persons physical activities. Purpose of rights: to enable individual to pursue his or her significant interests and to protect these from intrusions of other individuals.

Right to Privacy
Right to privacy important because of protective functions: Protects us from being shamed, ridiculed, blackmailed or other harm. Prevents others from interfering in our plans simply because they do not hold the same values we hold. Protects those whom we love from being injured by having their beliefs in us shaken. Protects us from incriminating ourselves.

Right to Privacy
Right to privacy also important because of enabling functions: Enables us to develop ties of friendship, love, and trust. Enables certain professional relationships to exist, e.g. psychiatrist and patient. Enables a person to sustain distinct social roles. Enables people to determine who they are by giving them control of the way they present themselves to society and to present themselves in a special way to those whom they select.

Right to Privacy
Right to privacy must be balanced against other individuals rights and needs. Employers have legitimate right to inquire into activities of employees or prospective employees, e.g. past applicants past work experience, e.g. employer investigation on theft or pilferage.

Right to Privacy
Three elements to be considered when collecting information that may threaten employees right to privacy: 1) relevance: employers not justified in inquiring into any areas of employees life that do not affect the employees work performance in a direct and serious manner. Dividing line between justified and unjustified investigation clear with respect to lower level employees but not in higher management hierarchy. Managers private activities or emotional instability can damage firms reputation.

Right to Privacy
2) Consent: firm justified in inquiring into employees life only if employee has clear understanding that inquiry is being made and clearly consents to this as part of the job or can freely choose to refuse the job.

Right to Privacy
3) Methods must be both ordinary and reasonable. Extraordinary methods unreasonable and unjustified unless circumstances are extraordinary. Use of extraordinary devices justified only on the following conditions: 1) the problem can be solved in no other manner. 2) problem is serious and the use of the means will identify the culprits and put an end to the problem 3) use of devices not prolonged beyond the time needed. 4)all information uncovered but irrelevant be disregarded and destroyed. 5) rate of failure taken into account.

Employees Rights: Freedom of Conscience

Freedom of conscience: individuals may not be forced to cooperate in activities that they conscientiously believe are wrong. Basis of this right: interest that individuals have in being able to adhere to their religious or moral convictions. Due to absence of legal protection of this right, some have supported the practice of whistleblowing.

Whistleblowing
Whistleblowing may be internal (reported only to those higher in the organization) and external (reported to individuals or institutions outside the organization). It is argued that whistleblowing is always wrong because employee has contract to be loyal to employer and to keep all aspects of business confidential. But contract is void if it requires employee to do something immoral.

Whistleblowing
External whistleblowing morally justified if: 1) there is clear substantiated comprehensive evidence that firm is engaged in activity seriously wronging or will wrong other parties. 2) reasonable attempt to prevent wrong through internal whistleblowing have been tried and failed. 3) reasonably certain that external whistleblowing will prevent the wrong 4) wrong is serious enough to justify injuries will probably inflict on oneself, family and other parties.

Whistleblowing
External whistleblowing may be justified but not obligatory. Obligatory only: 1) person has moral duty to prevent the wrong because it is part of persons professional responsibilities (e.g. accountant) or because no one else can or will prevent the wrong. 2) wrong involves serious harm to societys overall welfare or a serious violation of basic moral rights of an individual or group, or a serious injustice against a person or group.

Whistleblowing
External whistleblowing is a symptom of a structural problem: employees have no mechanism to voice their concerns through internal whistleblowing. Even with open door policies, fear of reprisal will prevent employee from bring concern to higher authority. To overcome these problems, many firms have implemented programs that provide channels and procedures to facilitate internal whistleblowing.

Right to participate and Participatory Management

How democratic is an organization? Four theories of systems of organization (Rensis Likert) : 1) exploitative authoritative 2) benevolent authoritative 3) consultative 4) participative No conclusive research on which one is most effective. Thus, management has obligation to use participative management with the right people and in the right organizational contexts.

Right to Due Process vs. Employment-at-Will

Employment-at-will: unless employees are protected by explicit contract (such as union employees), employers may dismiss their employees at will. Based on assumption that as owner of business, employer has right to decide freely who will work for the business, and employee freely accepts and freely can reject the work.

Right to Due Process versus Employment-at-will

Critique of employment-at-will: 1) employee are often not free to accept or reject employment without suffering harm due to difficulty of finding another job. 2) employee works for a firm with understanding that firm will treat him fairly. 3) workers have right to be treated with respect as free and equal persons. Included here is the right to non-arbitrary treatment and right not to be forced to suffer harm unfairly or on basis of false accusations.

Right to Due Process versus Employment-at-will

Right to due process refers to fairness of the process by which decision-makers impose sanctions on subordinates. Most critical right of employees, because without this right, other rights may not stand to be respected. Due process ensures individuals are not treated arbitrarily, maliciously, capriciously by their superiors in the administration of the firms rules, setting a limit to the exercise of power of superior.

Right to Due Process

Due process most important in hearing of grievances. Essential components of effective grievance procedure: 1. 3 to 5 steps of appeal. 2. Written account of grievance on the first level. 3. Alternate routes of appeal so employee can bypass his superior. 4. Time limit for each step of appeal. 5. Permission for employee to have 1 or 2 co-workers to accompany him.

Employee Rights and Plant Closings

Moral rights of workers involved in plant closing should continue to be respected, among them the right to be informed about impending shutdowns. Steps companies can take to minimize harmful effects of plant closings (William Diehl): 1. Advance notice 2. Severance pay 3. Health benefits 4. Early retirement 5. Transfer 6. Job retraining 7. Employee purchase 8. Phasing out local taxes

ORGANIZATIONAL POLITICS
Organizational politics are the processes in which individuals or groups within an organization use nonformally sanctioned power tactics to advance their own aims. Power tactics called political tactics, often covert. Examples of political tactics: blaming or attacking others, controlling information, developing a base of support for ones ideas, image building, ingratiation, associating with the influential, forming power coalitions and developing strong allies, creating obligations.

Political Tactics
Basic source of power is the creation of dependency. Such dependencies can be created by getting control over scarce resources desires by others, and establishing favorable relationships.

Political Tactics
Dilemma for individual in organization is knowing where the line that separates morally legitimate and necessary political tactics from those that are unethical. Four questions to ask regarding the ethical use of political tactics:

Political Tactics
The utilitarian question: Are the goals one intends to achieve by the use of the tactics socially beneficial or socially harmful? Clearly unethical: political tactics that pursue personal goals at the expense of organizations productive goals, and political tactics that knowingly involve inefficiency and waste. Political tactics may be used to ensure installation of morally legitimate goals as long as they meet the next two criteria.

Political Tactics
The rights question: Do the political tactics used as means to these goals treat others in a manner consistent with their moral rights? Deception and manipulation unethical because they fail to respect a persons right to be treated not merely as a means but also as an end. Not always wrong to use deceptive and manipulative political tactics. E.g. when one knows that this is part of the game, and I choose to remain in the organization and I consent to play the game.

Political Tactics
Use of deceptive or manipulative political tactics clearly unethical when: 1) used against persons who do not know or do not expect these tactics to be used against them 2) used against persons who are not free to leave the organization 3) used against persons who are not skilled at defending themselves against these tactics.

Political Tactics
Justice question; Will the political tactics lead to an equitable distribution of burdens and benefits? E.g. showing favoritism in administering budget or information system. E.g. engineer competing with another for promotion may cultivate or flatter superiors, discredit rival, even if the other engineer is more qualified. Distributive justice: individuals who are similar in all relevant respects should be treated similarly, and individuals who are dissimilar in relevant respects should be treated dissimilarly in proportion to their dissimilarity.

Political Tactics
Caring question: What impact will the political tactics have on the web of relationships within the organization? Use of power in organization tends to routinize the dehumanized treatment of the less powerful.

THE CARING ORGANIZATION

Caring model: organization is a network of relationships in which connected selves form webs of on-going relationships with other connected selves. Caring organization is one in which caring is: 1) focused on persons, not quality, profits 2) undertaken as end in itself, not as means towards quality or profit, etc. 3) essentially personal 4) growth-enhancing for the cared-for, moving them to use and develop full capacities.

CARING ORGANIZATION
Caring organization, it is argued, will exhibit better economic performance than contractual and political due to: 1) lowering costs of disciplinary action 2) develops concern for serving customer and therefore more competitive 3) can inspire and motivate other employees to excel.

CARING ORGANIZATION
Key ethical issue in caring organization: potential for caring too much and potential for not caring enough. 1. Moral problem of caring too much: demand for caring for others can lead to burnout. Conflict of caring for others and caring for oneself. Also, caring for others may conflict with what we may feel we owe to others. E.g. caring for a friend who is violating company policy and fairness toward company that requires such violations be reported.

CARING ORGANIZTION
2. The moral problems of not caring enough Individual level: fellow employee or customer in need, and we ignore that need. Organizational level: systematic driving out caring through indiscriminate layoffs, impersonalized bureaucracies, managerial styles that look at employees as disposable costs, or through reward systems that discourage caring and reward competitiveness.

END!!!
Work is love made visible

Kahil Gibran

CORPORATIONS
Are legal entities, with legal rights and responsibilities similar but not identical to those enjoyed by the individuals. Business Corporations are limited liability companies-that is, their owners or stockholders are only liable for corporate debts up to the extent of their investments

Corporate Moral Agency

Corporations are entity that can have Moral Responsibilities in making rational and moral decisions and they can be held morally blameworthy and praiseworthy of their actions.

Corporate Moral Agency

Corporate Internal Decision (CID) structure makes it reasonable to assign moral responsibility to corporation. Assigning moral responsibility among individuals inside the corporation.

Narrow View
Corporate responsibility should be construed narrowly to cover only profit maximization. 1. Diverting the corporation from the pursuit of profit makes our economic system less efficient. 2. Businesss only social responsibility is to make money out within the name of the game. 3. Private enterprise should not be forced to undertake public responsibilities that properly belong to the government.

Narrow View

Advocates of the narrow view stress that management has a promissory relation with the owners (stockholders) of a corporation, which obligates it to focus on profit maximization alone.

Broader View
1. 2. 3. Corporate Responsibility broadly include refraining from socially undesirable behavior contributing actively and directly to the public good. Corporations have additional responsibilities because of their great social and economic powers. Business is governed by implicit social contract, which requires it to operate in ways that benefit the society Corporation must take responsibility for the unintended side effects of their business transactions (externalities) and weigh the full social costs of their activities.

Corporate Responsibility
Should corporate responsibility be broadened? Argument against: 1. The invisible hand argument. 2. The hand-of-government-argument. 3. The inept-custodian argument. 4. The materialization-of-society argument.

Corporate Responsibility
Those proposing broader corporate responsibilities see the creation of an ethical atmosphere within the corporation as an important steps. Essential to this atmosphere are corporate acknowledgement of the critical importance of ethics: corporate encouragement of morally responsible conduct by its members, An end to corporate defensiveness in the face of criticism, Corporate recognition of the pluralistic nature of our social system.

a.
b. c.

Corporate Responsibility
Corporation and the people who make them up must have high moral standards and monitor their own behavior because there are limits to what the law can do to ensure that business behavior is socially and morally acceptable.

Corporate Responsibility
All settled economic life requires trust and confidence. The adoption of realistic and workable codes of ethics in the business world can actually enhance business efficiency. This is particularly true when there is an imbalance of knowledge between buyer and the seller.

Corporate Responsibility
To improve the organizational climate so individuals can reasonably be expected to act ethically: 1. Adopt a corporate ethical code. 2. Set up a high-ranking ethics committee. 3. Training in their management development program. 4. Attention to corporate culture is also crucial to the successful institutionalization of ethics inside an organization.