MGMT 3000 1st Edition Exam 2 Study Guide Lectures 14 22 Lecture 14 February 18 What are ethics 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 What are the 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 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 What are the steps to the Ethical decision making model 1 Identify the problem 2 Identify the constituents 3 4 5 6 Diagnose the situation Analyze our options Make your choice Act Under the US sentencing commission Companies can be prosecuted and fined up to what amount for employee s illegal actions Companies can be fined up to 300 Million Therefore companies establish compliance programs to encourage ethical behavior and to reduce fines Can Companies be prosecuted even If management was not aware of illegal behavior Companies can still be prosecuted even if management was unaware of the illegal behavior How does the US sentencing commission calculate the fines 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 Identify the 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 Content of codes of conduct Employee practices Employee client and vendor information Public information Conflicts of interest Relationships with vendors Environmental issues 2 3 4 5 6 7 Management must develop practical ethical standards and procedures specific to business Be run by top manages a Require ethical and moral leadership from senior management 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 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 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 Punish violators a Management must discipline all violators of ethical standards b Many business are unwilling to discipline violators 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 Lecture 15 February 23 What is social responsibility A business obligation to pursue policies make decision and take actions that benefit society 2 Perspectives 1 Shareholder model only social responsibility that businesses have is to maximize profits 2 Stakeholder Model management s most important responsibility is not just maximizing profits but firm s long term survival Who are the stakeholders Stakeholders are people or groups whoa re interested and affected by the organization 1 Primary stakeholders groups on which organization depends for long term survival a Shareholders employees customers suppliers local communities 2 Secondary stakeholders Influence or be influenced by a company and can affect public perceptions about a company a Media special interest groups What are the Social responsibilities Economic Making a profit by producing a product valued by society Most basic social responsibility Legal Company s responsibility to obey laws and regulations Ethical responsibility not to violated accepted principles of right and wrong when conducting business Discretionary social roles that businesses play in society beyond the other 2 Voluntary not considered unethical if they don t do it Ex Helping earthquake victims What is Social responsiveness Social responsiveness is a company s strategy to respond to stakeholder s economic legal ethical or discretionary expectations regarding