CH6 - Ethics of Business Management and Leadership

Question 1

Ethical leadership

Answer 1

communicate ethical standards and encourage ethical conduct

Question 1

Three possible forms of leadership applicable to the ethics of business

Answer 1

Ethical, Responsible, Servant leadership

Question 2

Responsible leadership

Answer 2

narrow orientation focused on financial performance and extended orientation with stakeholder view

Question 3

Servant leadership

Answer 3

emphasizes concern for other and combines motivation to lead with the need to serve others (includes the design and implementation of corporate ethics programs)

Question 4

Statement of values def

Answer 4

A description of the beliefs, principles, and basic assumptions about what is desirable or wroth striving for in an organization

Question 5

Key components to value statements / statement of values

Answer 5

-> Key stakeholder interests to be satisfied and balanced
-> Emphasis on quality
-> Efficiency
-> Work climate
-> Observance of codes of conduct

Question 6

Code of conduct def

Answer 6

Explicitly states what is appropriate behaviour is by identifying what is acceptable and unacceptable

Question 7

Code of ethics

Answer 7

A statement of principles or values that guide behaviour by describing the general value system within which a corporation attempts to operate in a given environment

Question 8

Difference between code of conduct and code of ethics

Answer 8

Conduct: enforced by external power of authority, convey rules, members of org must obey or face penalties, what MUST be done

Ethics: suggest guidelines to follow, penalties not imposed, emphasize qualities members should have

Question 9

Types of codes:

Answer 9

-> Corporate of business enterprise
-> Professional organizations
-> Industry and sector
-> Single issue
-> Cordes from national and international bodies

Question 10

What makes an ethical salesperson (keywords)

Answer 10

Integrity, responsibility, active listening, empathy, honesty, customer-focused, flexibility, awareness, respect

Question 11

How do codes institutionalize ethical behaviour?

Answer 11

-> Increasing awareness
-> Discouraging ethical apathy
-> Facilitating ethical decision-making
-> Making it easier to refuse an unethical request

Question 12

What kind of rules / content is in codes

Answer 12

-> Criteria for decision-making
-> Responsibility towards employers
-> Conflicts of interest (how to identify and deal with)
-> Protection of corporate assets
-> Appropriate business practices (honesty, fairness, etc.)
-> Appropriate conduct (on behalf of corp – with customers for example)
-> Responsibilities to society at large (contribution to political parties, lobbying, et.c)
-> Implementation procedures (familiarity with code, reporting violations)
-> Specification of enforcement, penalties

Question 13

How the content of codes has evolved over time (5 generations)

Answer 13

First generation -> conflict of interest

Second generation -> commercial conduct

Third generation -> employee rights and motivation of the workforce

Fourth generation -> wider responsibility, with attention on the environment and respect for communities

Fifth generation -> international concerns, including human rights, the rule of law and labour conditions

Question 14

Criticism against codes

Answer 14

• Unenforceable standard
• Unnecessary for majority (most corps operate at ethical level above code)
• Penalties may be insignificant
• Convincing someone to comply is not easy
• Often idealistic and written in meaningless generalities
• Merely to control competitive conduct among corps, designed to prevent gov legislation
• Serve as a response to public criticism

Question 15

Ethics Training def

Answer 15

-> Involves teaching employees about the values and policies on ethics they should follow in their decision making

-> Teaching sessions can involve: managers / outside consultants, addressed to all levels of employees (esp management), online exercises, practical checklists and tests to evaluate actions

Question 16

2 Types of checklists and tests

Answer 16

Nash and the Pagano model (1987)

Question 17

Nash

Answer 17

Plainly worded questions should be used my managers when examining ethical of a business decision (ex. Have you defined the problem accurately? How did this situation occur in the first place)

Question 18

Pagano model (1987)

Answer 18

Identifies six tests that provide insights into the ethics of a business’ actions:
- is it legal
- benefit/cost test
- categorical imperative
- light of day test
- do unto others
- ventilation test

Question 19

Conflict of interest def

Answer 19

Situation in which an individual has a private or personal interest that is sufficient to appear of influence the objective exercise of that individual’s duties

Question 20

Different degrees of conflicts of interest

Answer 20

Real: manager / employee has knowledge of a private economic interest / any kind of personal gain that is sufficient to influence the exercise of their duties / responsibilities

Apparent: conflict of interest can be deducted from appearances; exists when there is a reasonable apprehension that a well-informed person could make the connection

Potential: situation that may develop into an actual conflict, employee can foresee that they have a private interest that may be sufficient to influence a duty / responsibility

Question 21

Common conflicts of Interest

Answer 21

Self-dealing: manager / employee takes an action in an official capacity that involves dealing with oneself in a private capacity and that confers a benefit to oneself (or family, business partners)

Accepting gifts or benefits

Using employer’s property: inappropriate use (ex. Taking office supplies home)

Using confidential information: use for personal or private purposes of confidential info obtained from some other source (ex. Customer, supplier) to gain some benefit

Outside employment or moonlighting: work / activity in which an employee engages outside normal working hours for additional remuneration

Post-employment: subsequent / future employment where info / contacts obtained during employment results in some benefits

Personal conduct: employee’s behaviour in private life may reflect adversely on employer

Question 22

Ethics Audits def

Answer 22

-> Systematic effort to discover actual or potential unethical behaviour in an org
-> Designed to uncover unethical behaviour and identity existing opportunities for unethical behaviour
-> Useful in conjunction with a code of ethics
-> Conducted by consultants -> advise management on how to put “integrity” into corporate culture

Question 23

Ethics officer def

Answer 23

Independent manager who report to the board of directors or CEO, reviews complaints or information from anyone in the org / any stakeholder, studies situation and recommends action if necessary

Question 24

Compliance officer

Answer 24

Ensures all employees are familiar with corp’s policies and codes, and with gov laws and regulations

Question 25

Ethics committees

Answer 25

Group of directors, managers or staff formed to monitor ethical standards and behaviour

Question 26

Ethics reporting

Answer 26

Corps have established reporting systems so that they can become aware of issues and concerns relating to corporate ethical conduct (most common = hotlines)

Question 27

Whistleblowing

Answer 27

Act of voluntary disclosure of inappropriate behaviour or decisions to persons in positions of authority in an org (many ethical issues related to whistleblowing have ethical implications for whistleblowers and managers)

Question 28

Issues with whistleblowing

Answer 28

Remain silent, quit, or disclose wrongdoing?

Range of concerns from clearly illegal to maybe illegal to issue of morality

Does obligation to employer supersede obligation to self, profession, or industry?

Will the whistleblower be believed?

When and who to tell?

What will the consequences be?

Question 29

Tasks of the board of directors / top management in relation to ethics

Answer 29

• Collectively identify values that determine acceptable behaviour in the firm
• Put in place a process that ensures values are reflected in actions
• Success of any ethics programs depends on commitment of top management
• Announce program
• Champion its development and implementation
• Aspire to lead in an ethical manner

Question 30

Management and leadership models

Answer 30

Immoral: devoid of ethical principles, actively opposed, motives are selfish, only cares about org’s gains, to some degree knows right from wrong and chooses to do wrong, no care of expectations of others, law is barrier to overcome

Amoral: without ethics, not actively immoral, two types – intentional (business activity lies outside of moral judgements) or unintentional (morally careless), lack ethical perception, may be well intentioned but unaware of harms of their actions

Moral: high standards (above law) of ethical behaviour, aspires to succeed only within confines of ethical principles

Question 31

Approaches to ethics programs (3)

Answer 31

Formal approach -> based on organizational norms that are written as a code of conduct

Monological approach -> allows organizational managers and employees to determine themselves what is right or wrong

Dialogical approach -> emphasizes communication before decision are made and implemented

Question 32

Compliance vs values-based programs

Answer 32

Compliance: rules / laws, externally imposed standards, prevent criminal misconduct, control – auditing and penalties, code of conduct - specific

Values: self-governance, enable responsible conduct, employee discretion increased, code of ethics, general

Question 33

Evaluation of ethics programs

Answer 33

Implicit ethics programs are implemental through: org’s culture, rewards systems, valued behaviour, promotion policies, performance measures

Criteria for an effective ethics program: Visibility, ownership, fit, balance

Question 34

Benefits of ethics programs

Answer 34

• Business practices more beneficial to society
• Increased awareness of ethics
• Alignment of corporate behaviour with values
• Heightened ethical sensitivity of employees
• Sensitizes managers and employees to elgal requirements
• Avoidance of criminal acts
• Integration of values with quality and strategic management
• Implications of management decisions on stakeholders
• More favourable public image

Question 35

Four types of executive ethical leadership

Answer 35

Hypocritical leader = strong moral manager and weak moral person

Unethical managers = weal moral manager and weak moral person

Ethical leader= strong moral manager and strong moral person

Ethically silent leader = weak moral manager and either a weak or strong moral person

Question 36

Guidelines for effective ethics management (4)

Answer 36

FIRST: understand the existing ethical culture
SECOND: communicate the importance of ethical standards
THIRD: focus on the reward system
FOURTH: promote ethical leadership throughout the firm

Question 37

Corporate culture def (+ethical corp culture)

Answer 37

Set of values, beliefs, assumptions and symbols that define the way in which an organization conducts its business

Ethical corporate culture= “subset” of the org’s broader culture

Question 38

Why ethical leadership and programs fail

Answer 38

• Managers are morally imperfect
• Self-interest
  Rationalization and self-delusion
• Threat of formal/informal sanctions
• Tolerance to risk-taking behaviour
• Pressure in particular situations