MANA 3319 1st EditionExam # 2 Study Guide Chapters: 5-9Chapter 5 (September 9)Chapter 5: Ethics and Corporate ResponsibilityEthics: the system of rules that governs the ordering of values. Orgs have social responsibility beyond earning legal profits in legal and ethical ways. It's a Big Issue: No ethics leads to public mistrust. Low level employees get in most trouble. It's a Personal Issue: Most people have unconscious biases that favor themselves and their own group. Ethical issues aren't easy. EthicsAim of ethics is to identify rules that should govern people's behavior and the "goods" that are worth seeking. Ethical decisions guided by underlying values of the individual. Ethical issue: situation, problem,or opportunity in which an individual must choose among several actions that must be evaluated as morally right or wrong. Business ethics: the moral principles and standards that guide behavior in the world of business. Ethical Systems: Moral philosophy: principles, rules, and values people use in deciding what is right or wrong. Actually complex. Various ethical systems like universalism. Universalism: the ethical system stating that all people should uphold certain values that society needs to function. Fundamental like honesty, rules against murder, torture, deceit, ect. Caux Principles: ethical principles established by international executives based in Caux, Switzerland, in collaboration with business leaders from Japan, Europe, and the United States. Two basic ideals in Caux: kyosei (livingand working together for the common good, allowing cooperation and mutual prosperity with healthy and fair competition) and dignity. Not everyone acts the same in each scenario. Egoism and Utilitarianism: Egoism: an ethical system defining acceptable behavior as that which maximizes consequences for the individual. "Do what's best for yourself." Similar to Adam Smith's concept of invisible hand in business and self-interest. Utilitarianism: an ethical system stating that the greatest good for the greatest number should be the overriding concern of decision makers. Greater good for everyone. Relativism: Relativism: philosophy that bases ethical behavior on the opinions and behaviors of relevant other people. Acknowledges different ethical viewpoints. Different norms in different cultures. Virtue ethics: Virtue ethics: classification of people based on their level of moral judgment. Come from person with good moral character. Can transcend societal rules. Kohlberg's modelof cognitive development: perspective that what is moral comes from what a mature person with "good" moral character would deem right. 3 stages: preconventional, conventional, and principled. Preconventional: make decisions based on rewards, punishments, and immediate self-interest. Conventional: conform to expectations by groups or institutions like society, family, peers. Principled: seebeyond authority, laws, and norms, and follow self-chosen ethical principles. Business Ethics: People cynical of business leaders. Most people feel ethically conflicted at companies. The Ethics Environment: Sarbanes-Oxley Act: an act passed into law by Congress in 2002 to establish strict accounting and reporting rules to make senior managers more accountable and to improve and maintain investor confidence. Requires companies to have more independent board directors to adhere to strict accounting rules and to have senior managers personally sign off on financial results. Intended to improve ethical behavior. Ethics also influenced by company's work environment. More difficult to be ethical with an org with international activities. Ethical climate: in an organization, the process by whichdecisions are evaluated and made on the basis of right and wrong. Danger Signs: Maintaining ethical behavior is constant challenge. Factors that create unethical behavior: 1. excessive emphasis on short-term revenues over long-term considerations, 2. failure to establish a written code of ethics, 3. a desirefor simple, quick-fix solutions to ethical problems, 4. an unwillingness to take an ethical stand that may impose financial costs, 5. consideration of ethics solely as a legal issue or a public relations tool, 6. lack ofclear procedures for handling ethical problems, 7. responding to the demands of shareholders at the expense of other constituencies. Ethical leader: one who is both a moral person and a moral manager influencing others to behave ethically. Corporate Ethical Standards: Managers must be more than ethical people, but lead others to behave ethically. Ethics Codes: Must be written carefully and tailored to individual companies' philosophies. Most address employee conduct, community and environment, shareholders, customers, suppliers and contractors, political activity, and technology. To make an ethics code effective: 1. involve those who have to live with it in writing the statement, 2. focus on real-life situations that employees can relate to, 3. keep it short and simple so it's easy to understand and remember, 4. write about values and shared beliefs that are important and that people can really believein, 5. set the tone at the top, having executives talk about and live up to the statement. Ethics Programs: Ethics programs usually have formal ethics codes that articulate company's expectations regarding ethics: ethics committees that develop policies, evaluate actions, and investigate violations; ethics communication systems that give employees a means of reporting problems or setting guidance; ethics officers who investigate allegations and provide education; ethics training programs, and disciplinary processes for addressing unethical behavior. Can range from compliance-based to integrity-based. Compliance-based ethics programs: company mechanisms typically designed by corporate counsel to prevent, detect, and punish legal violations. Includes communicating legal standards and procedures, assigning high-level managers to oversee compliance, auditing and monitoring compliance, reporting criminal misconduct, punishing wrongdoers, and preventing future offenses. Integrity-based ethics programs: company mechanisms designed to instill in people a personal responsibility for ethical behavior. Goes beyond illegality. Ethical Decision Making: Takes moral awareness, moral judgment, and moral character. John Rawls "veil of ignorance". Thinking before deciding. Minimize bias. Courage: Moral character. Doing the right thing. Identifying an