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Chapter 5: Management Ethics
Ethics
•  Moral code of principles that
set standards of “good” or
“bad” or “right” or “wrong” in
one’s conduct
•  Ethical behavior – what is
accepted as “good” or “right” in
the context of the governing
moral code
Areas covered by codes of ethics
Bribes and kickbacks
Political contributions
Honesty of books or records
Customer/supplier relationships
Confidentiality of corporate information
Management Ethics
•  The study of moral standards à helps managers
make decisions or take actions that are good and
right in the context of he organization.
Ethical issues for global firms
•  Corruption
•  illegal practices that further one’s
business interests
•  Sweatshops
•  employing workers at low wages
for long hours and in poor working
conditions
•  Child labor
•  full-time employment of children
for work otherwise done by adults
•  Sustainable development
•  meeting current needs without
compromising future needs
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Case Study: American Woman Working in

a Garment Factory (1990’s)
Leadership and ethics

•  Let’s open the case…

•  Guide questions:
•  Do jobs like this still exist here in the
country?
•  Given the competitive pressures of the
international market place, how can we as
managers avoid such situations?

We need ethical frameworks… 4 Sources of Management Ethics

•  … to serve as our guide in
managerial decision
making.

•  … to serve as our moral

and ethical compass ”so
that we don’t “lose our
way.”

Source: Dyck and Neubert, 2012

Public Private
Informal Co-workers, managers Family
Social norms, media Friends
Formal Education Personal philosophies
Ethics training Family maxims
Religious teachings

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Kohlberg’s stages of individual moral Mainstream versus multistream

development
Consequentialism Virtue theory
What is “the greatest good”? Acting virtuously is the best
Best “generic” measure of “generic” way to improve
good is wealth or money. overall societal well-being
How can wealth be Key virtues
maximized? •  Serving others
Through individualism—the greatest •  Fostering human development
good for the greatest number (larger through work
community) is achieved when profits •  Nurturing community by including
are maximized by rewarding people all stakeholders
(shareholders) for investing their •  Balancing human and ecological
resources into economic activity concerns (sustaincentrism)

Ethical influences on the four Four views of ethical behavior

management functions
Functions Mainstream approach Multistream approach
Planning Focuses on organization- Focuses on corporate
specific responsibility social responsibility

Organizing Emphasizes deterrence Emphasizes promotion

of negative behavior in its of positive organizational
structures and systems behavior

Leading Utilizes a transactional Promotes and models

form of leadership to evoke servant leadership
ethical behavior

Controlling Stresses compliance to Stresses commitment to

formal and informal codes growth and empowerment
and rules of behavior

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Alternative views: Moral Rights Theory

Rights Description
Free consent Individuals are to be treated only as they knowingly
and freely consent to be treated
Based on the four
Privacy Individuals can choose to do as they please away
views of ethical from work and have control of information about
behavior their private life
(Individual, Moral, Freedom of Individuals may refrain from carrying out any order
conscience that violates their moral or religious norms
Justice,
Free speech Individuals may criticize truthfully the ethics or
Utilatarian) what legality of actions of others
will be the “right” Due process Individuals have a right to an impartial hearing and
thing to do? fair treatment
Security Individuals have a right to live without endangerment
or violation of their health and safety

Procedural, Distribution, Interactional,

Alternative views: Justice Theory Commutative Justice?
Dimension Description
Procedural Policies and rules are fairly applied
justice
Distributive Outcomes are allocated fairly among
justice people without respect to individual
characteristics based on ethnicity, race,
gender, age, sexual orientation, etc.
Interactional People are treated with dignity and
justice respect
Commutative An exchange or a transaction is fair to all
justice parties

Maintaining high ethical standards

Ethics training Codes of ethical conduct
•  Formal statement of an
organization’s values and ethical
principles regarding how to behave
in situations susceptible to the
creation of ethical dilemmas

•  Structured programs that help

participants to understand ethical
aspects of decision making.
•  Helps people incorporate high
ethical standards into daily life.
•  Helps people deal with ethical
issues under pressure.

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Management in Practice:
How Do Managers Actually Make Ethical Decisions?

•  General Rules-of-Thumb:
1 Performance is what really counts, so make
your numbers.
2 Be loyal and demonstrate that you are a team
player.
3 Don’t break the law.
4 Don’t over-invest
in ethical behavior

Last word: Integrity Initiative Ethical decision making process

Steps Mainstream Multistream
•  A multisectoral campaign that seeks
approach approach
to institutionalize integrity standards
1. Recognize ethical Threats and Threats and
among various sectors of society
issues (Define) opportunities related opportunities related
•  Launched by the Makati Business to the owner’s wealth to overall well-being
Club and the European Chamber of 2. Gather information Emphasis on facts, Listen to others, ask
Commerce of the Philippines on and develop checking policies for help
December 16, 2010 alternatives (Discover)

•  Aims to diminish the vicious cycle of 3. Evaluate Choose what Collaboratively choose
information and make maximizes profit within what maximizes
corruption in the Philippines ethical choice legal bounds overall well-being
•  Hopes to build trust in government, (Discern)
a more equitable society, and fair 4. Implement the Courageously Courageously try new
market conditions ethical decision challenge norms things
(Deliver)

Situation 1: Kay Smith Ethical decision making (recap)

•  Kay Smith is one of your top-performing subordinates. Mainstream Multistream
She has shared with you her desire to apply for
Recognize as ethical (awareness) Recognize as ethical (awareness)
promotion to a new position just announced in a different issues those which threaten or promote issues those which threaten or
division of the company. This will be tough on you since owner’s wealth promote overall well-being
recent budget cuts mean you will be unable to replace Gather information and develop Gather information and develop
anyone who leaves, at least for quite some time. Kay alternatives that are consistent alternatives that are consistent with
with facts and policies listening to others
knows this and, in all fairness, has asked your permission
before she submits an application. It is rumored that the Evaluate information and make ethical Evaluate information and make
choices that maximizes ethical choices that nurture overall
son of a good friend of your boss is going to apply for the profit within legal bounds well-being
job. Although his credentials are less impressive than
Kay’s, the likelihood is that he will get the job if she Implement ethical decisions, Implement ethical decisions, which
which may require courageously often take the form of courageous
doesn’t apply. What will you do? challenging norms experiments