MGMT 3000 1st Edition Lecture14 Outline of Last Lecture I Disruptive Innovation theory II Managing Sources of innovation III Managing Change Outline of Current Lecture I Ethics II Influences on Ethical Decision making III Ethical decision making model IV US Sentencing Commission Current Lecture ETEE Ethics are the set of moral principles or values that define right and wrong for a person or group Ethical behavior follows accepted principles of right and wrong Managers must be careful of Authority and power can tempt managers to engage in unethical practices Handling information managers are expected to be truthful and be confidential with information Influencing behavior of others forcing others to do unethical actions Goals that they set can t set unrealistic goals Influences on ethical decision making 1 Ethical intensity of the decision a Ethical intensity is the degree of concern people have about an ethical issue b Factors of ethical intensity i Magnitude of consequences total harm or benefit derived from an ethical decision ii Social consensus agreement on whether behavior is good or bad iii Temporal immediacy time between act and consequences of the act iv Probability of affect chance that something will happen and harm others v Proximity of effect distance between a decision maker and those affected by his her decisions vi Concentration of effect Total harm that an act produces on the average person 2 Moral development of the manager These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute a Kohlberg s Stages of moral development Ethical decisions are based on person s level of moral development i Preconvention level People decide based on selfish reasons 1 Staying out of trouble and doing things for your benefits ii Conventional level make decisions that conform to social expectations 1 Do what other good people do and follow the law iii Post conventional level make decisions using ethical principles Ethical decision making model 1 Identify the problem 2 Identify the constituents 3 Diagnose the situation 4 Analyze our options 5 Make your choice 6 Act US Sentencing Commission guidelines for organizations Under the US sentencing commission Companies can be prosecuted and fined up till 300 Million for employee s illegal actions Companies establish compliance programs to encourage ethical behavior and to reduce fines Companies can still be prosecuted even if management was unaware of the illegal behavior First determine Base fine by determining what level of offense has been committed Culpability scores way to assign blame to the company A culpability score of 5 indicates that a company has a compliance program and reports an offense to authorities A culpability score of 4 indicates that a company secretly plans and approves illegal activities Total fine is found by multiplying base fine by culpability score Steps for US sentencing commission guidelines for organizations A qualifying compliance program must 1 Establish standards and procedures Ethical climate Organizational culture is key to fostering ethical decision making Management needs to be active in and committed to the ethics program Encourage Managers and employees to report ethical violations Whistleblowing Codes of conduct o A way of establishing standards of behavior and communicating them to managers and employees o Single most important element of ethics and compliance program o Fairly recent o Positively affect corporate culture Content of codes of conduct Employee practices Employee client and vendor information Public information Conflicts of interest Relationships with vendors Environmental issues Ethical management practices Political involvement The code must be communicated inside and outside the company Management must develop practical ethical standards and procedures specific to business 2 Be run by top manages a Require ethical and moral leadership from senior management 3 Encourage hiring and promotion of honest and ethical people a Use Overt integrity tests estimate job applicant s honesty by directly asking them what they think or feel about theft or about punishment of unethical behaviors b Personality based integrity tests indirectly estimates job applicant s honesty by psychological traits 4 Encourage employees to report violations a Employees must have outlets to anonymously report questionable behaviors b Hotlines are the most common way to report corporate fraud c Required by the SOX Act 5 Educate employees about compliance a Ethics training which has the objectives of i Learning fundamental business ethics ii Developing employee s awareness of ethics iii Achieve credibility with employees iv Learn to solve ethical dilemmas identify cases of unethical behavior whistle blowing criteria and developing code of ethics 6 Punish violators a Management must discipline all violators of ethical standards b Many business are unwilling to discipline violators 7 Find ways to improve program after violations occur a Ethics audits intended to review such ethics initiatives as ethics programs code of conduct hotlines and ethics training programs b Sustainability audit help identify sustainability issues within an organization c Fraud risk assessment Review processes that identify and monitor conditions that pertain to a company s exposure to misconduct risk