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Business Ethic

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Business Ethic concept.

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Business Ethic

  1. 1. Business Ethics
  2. 2. Ethical Decision Making Framework  Helps to understand – How decision are taken within organization or in business  Factors that influence ;  Ethical Issue Intensity  Individual Factors  Organizational Factors  Opportunity  Business Ethics Evaluations and Intentions  Ethical or Unethical Behaviour
  3. 3. 1- Ethical Issue Intensity  Ethical Issue; “…..”  Intensity; “perceived importance to the decision maker”  EII; “the relevance or importance of an ethical issue in the eyes of the individual, work group, and/or organization”  “reflects the ethical sensitivity of the individual or work group that faces the ethical decision making process”  Moral intensity; “person’s perception of social pressure and the harm the decision will have on others.”
  4. 4.  Individuals cognitive state of concern about an issue  Whether or not having knowledge about an issue being ethical or unethical  Indicates their involvement in making choices
  5. 5. Characteristic and factors to intensity  Personal  Temporal  Values, beliefs, needs, perceptions, situations, personal pressure at particular place and time  Senior employees  Individuals with administrative authority  Liability formula – Federal Sentencing Guidelines
  6. 6. Individual factors  Six spheres that influence individual while making ethical choices  Workplace  Family  Religion  Legal system  Community  Profession  There level of importance shall vary depending on the perception of decision maker about the issue.
  7. 7. Relationship  Individuals sense of situation’s moral intensity increases individual’s perceptiveness regarding ethical problems  If an individual has high moral sensitivity then his/her perception about ethical problems will also increase.
  8. 8. Other Factors – Organizational settings  Management’s  Incentive system  Reward  Punishment  Corporate policies  Values  Positive or negative incentive system can increase or decrease the perception about an ethical issue being important  Awareness level of individuals
  9. 9. 2- Individual Factors  How will you decide an issue to be ethical or unethical in daily life?  Own values and principles  Socialization, religion and education  Workplace ethical issues;  Honesty  Conflicts of interest  Discrimination  Nepotism  Misuse/theft of organizational resources
  10. 10.  Individual factors that affect ethical awareness are;  Gender  Education  Work experience  Nationality  Age  Locus of control
  11. 11. 3- Organizational factors  Within organizational settings – workplace is influential than individual factors.  Corporate culture  Significant others  Obedience to authority
  12. 12. Corporate culture  Set of values, beliefs, goals, norms, and ways of solving problems shared by the members (employees) of an organization of any size (for profit or non-profit).  Includes behavioural patterns, concepts, values, ceremonies, and rituals that take place in the organization.  It gives individuals meanings as well as internal rules of behaviours.  Often expressed informally  Comments, wishes of top mgmt, dress code, working hours, extracurricular activities etc.
  13. 13. Evaluations and Intentions  Ethical dilemma – problem solving situation  Any concrete rules?  In fact, Decision rules are vague and conflicting  So uncertain results of such situations  Then what is the key !  Critical thinking  Responsibility for own decisions
  14. 14.  The edge to point of no return in ethical decision making  Individual’s intentions  Individuals actions  If intentions and behaviours are inconsistent with ethical judgement.  Guilt!  Which is first sign of unethical decision
  15. 15.  How an individual can deal with the state of guilt ?  Change their behaviour to reduce such feelings  Shift to value system that fits to decision taken  Change the decision next time  Some may quit
  16. 16. Role of Leadership in Developing Ethics program  See exhibit 5-1 in your books
  17. 17. Leadership Styles  Leadership styles and attitudes can help pinpoint where future ethical issue may arise.  Leaders must have knowledge and experience to make informed choices.  Empower and involve everybody  6 styles  Coercive, authoritative, affiliative, democratic, pacesetting, coaching
  18. 18. Classification of Leadership styles  Transactional  Attempt to create employee satisfaction through negotiation for desired behaviour or levels of performance.  Ensure procedures and rules are in place  Relationship based on situations (crisis, reaction, conflict) rather than ethical concerns  Transformational  Look for raising employees’ commitment level and encourage trust and motivation.  Communicate sense of mission and vision  Enhance and generate new learning  Stimulate new ways of thinking
  19. 19. Corporate culture  Set of values, beliefs, goals, norms, and ways of solving problems shared by the members (employees) of an organization of any size (for profit or non-profit).  Includes behavioural patterns, concepts, values, ceremonies, and rituals that take place in the organization.  It gives individuals meanings as well as internal rules of behaviours.  Often expressed informally  Comments, wishes of top mgmt, dress code, working hours, extracurricular activities etc.
  20. 20. Ethical Framework and Auditing Corporate Culture Concern for people Integrative ExactingApathetic CaringHigh Low High Low Concern for performance
  21. 21. Leaders Influence on Corporate Culture  Use power and influence to shape corporate culture  Status and power of leader directly related to the pressure he/she can put on others.  Five power bases to motivate individuals ethically/unethically  Reward power  Coercive power  Legitimate power  Expert power  Referent power
  22. 22. Reward Power  To influence an individual behaviour by offering something desirable.  Money, status, promotion etc.  Useful to change behaviour in the long run.
  23. 23. Coercive power  Penalizes the actions or behaviours  Opposite to reward power  Useful in changing behaviour  Short run and situational  Not good in making long term relationships  Continuous coercion  Power groups formation to counterbalance  Leaving organization
  24. 24. Legitimate power  A certain individual has right to authority  Others have obligation to accept  People follow because;  Centralised structure of organization  Charismatic personality of leader
  25. 25. Expert Power  The person’s knowledge or the perception that he/she posses knowledge  Credibility with sub ordinates  Credibility and expert power positively related to experience, education and honours.  Physicians, lawyers, consultants  Advantage of others’ ignorance
  26. 26. Referent Power  Referential  Individuals with similar objectives influencing each other by referring to same objective.  To be successful – empathetic  By identification with others, the decision maker gets confidence
  27. 27. Motivating Ethical Behaviour  Motivation – force within an individual that focuses his/her behaviour toward achieving a goal.  How motivation is created?  Motivation helps explain ethical behaviour! How?  Organizational level  individual’s needs/hierarchy of needs  Motivation and ethical behaviour
  28. 28. Corporate Culture & Ethics  How corporate culture can/may support for ethical/unethical behaviour?  Ethical Conflict – the conflict between the cultural values, in theory and in practice  Who develops plans in organization?  Who acts on rules in organizations  Consistency in ethical culture.
  29. 29. Whistle Blowing  Whistle blowing - exposing an employer’s wrongdoing.  Whistle blower – an employee who discovers corporate misconduct and chooses to bring it to the attention of others.  Internal whistle blowing  External whistle blowing
  30. 30. Ethics of Whistle blowing  Brave, honourable and people of integrity.  Save organization and society  Disloyal, not trustworthy, tattletale, informers, sneakers, spies  Loose cannons and troublemakers for personal gains and egos
  31. 31. When is whistle blowing ethical?  Company, through a product or decision will cause serious and considerable harm to the public or break existing laws.  A serious threat of harm, should report and state the moral concerns.  Immediate supervisor doesn’t act. Employee should exhaust internal procedures and chain of command to the BoDs.  Having documented evidence that is convincing to a reasonable and impartial observer.  Valid reasons to believe that revealing wrongdoing to public will result in the changes necessary to remedy the situation.
  32. 32. When is whistle blowing unethical  Potential for financial gains  Motivated by the opportunity financial gains  Media attention  Vendetta against company  Hard to evaluate one’s intentions but the key is;  Sure about your facts and evidence  Irrefutable

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