Chapter 10
Ethics at Work
McGraw-Hill/Irwin
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
10-2
Introduction
• In his book, Management Tasks, Responsibilities,
Practices, Peter Drucker suggests that:
– When an organization reaches 1,000 employees,
work rules should be developed to:
• Maximize efficiency
• Serve as a guide
10-3
Work Rules Criteria
• The best work rules:
– Reflect the ethical ideas of ownership
– Are reviewed periodically
– Are few in number
– Are clearly stated
– Are communicated to employees
– Apply equally to all employees
10-4
Code of Ethics Guidelines
• A comprehensive code of ethics includes guidelines
in each of these areas:
– Government relations
– Employee relations
– Community and environmental relations
– Business relations
– Production
– Consumer relations
10-5
Ethics as Center Stage
• The misdeeds of Enron, Arthur Andersen,
WorldCom and others have moved ethics to center
stage
– Organizational ethics concerns virtually everyone:
• Customers
• Employees
• Owners
• Citizens at large
10-6
Ethics as Center Stage
• James O’Toole, author of Vanguard Management,
claims that ethical, successful organizations:
• Try to satisfy all constituencies
• Are dedicated to high and broad purposes
• Are committed to learning in order to remain
current and responsive to change
• Try to be the best at whatever they do
10-7
Ethics at Work
• Rotary International teaches
leaders to test their actions
against four basic questions:
– Is it the truth?
– Is it fair to all concerned?
– Will it build goodwill and better relationships?
– Will it be beneficial to all concerned?
10-8
Why Ethics at Work are Important
• Lynn Sharp Paine, in Value Shift, cites motives
that link leaders and ethics at work:
– Belief that high ethical standards and business
success are related
– Belief that ethical commitment builds customer
trust
– Belief that reputation for integrity attracts and
keeps the best employees
– Wants the company to be a role model for society
– Wants to avoid conflicts with the law
– “60 Minutes”
• Misconduct threatens leaders at all levels
10-9
Costs of Ethical Misconduct
• Social and Economic Costs:
– Loss of customers and sales
– Increased turnover and loss of good employees
– Demoralized and cynical employees
– Loss of ownership equity
– High operating costs
– Legal expenses
– High funding costs
– Loss of public trust and goodwill
– Loss of financial viability and failure
10-10
Ethics at Work
• Leaders who believe ethics at work is about
principled leadership:
– Adhere to high standards of moral reasoning
– Value ideals such as truth, trust, and respect
– Rarely discuss risk prevention and public opinion
• Their behavior is about responsibility and doing
what is right because it is right
– As a result, employees take pride in their company
and engage in discretionary behavior beyond the
defined requirements of the job
10-11
Ethical Climates of Organizations
• In moral dilemmas regarding people, products,
prices, and profits, organizations typically reflect
one of three climates:
– Profit-maximizing
– Trusteeship
– Quality-of-life management
• Each climate provides different levels of support
for ethical decision making
– Exercise 10-1 describes each climate on 14 ethical
dimensions
10-12
Ethical Climates of Organizations
• Different ethical climates influence moral
judgments and result in different experiences
– As you complete the exercise, ask yourself:
• What type of organization do you respect?
• What type of organization do you have?
• What can you do to influence the ethics of
your organization?
10-13
Interpretation of Exercise 10-1
• Profit-maximizing, trusteeship, and quality of life
management correspond with Kohlberg’s levels of
morality
– Profit maximizing:
• Reflects pre-conventional morality (Level I)
• Focuses on self-gain and punishment avoidance
– Trusteeship:
• Reflects conventional morality (Level II)
• Conforms to the expectations of others and
to satisfy higher authorities
10-14
Interpretation of Exercise 10-1
• Quality-of-life management
– Reflects post-conventional morality (Level III)
– To do what is right over self-interest and
influence of others
– Ethical conduct based on the highest moral
principles
10-15
Ethical Climates of Organizations
• The higher the ethical climate; the higher the profit
– The best organizations satisfy social and financial
expectations
• Lynn Sharp Paine argues that “ethics counts” is a
better slogan than “ethics pays”
– Embraces values and morality as partners in
performance
10-16
Ethical Climates of Organizations
• Example of “ethics counts”
– Johnson & Johnson recalled 31 million bottles of
Tylenol after 7 deaths were linked to the product
– At the time, Tylenol was their most important brand
name
– Demonstrates that the well-being of society and an
organization are inextricably related
10-17
Ethical Climates of Organizations
• Leaders:
– Must model and reinforce values
– Establish the moral tone and ethical climate
– Attract and reward ethical conduct and business
performance
10-18
Ethical Climates of Organizations
• Author Carol Cooper on the need for value-based
and principled leadership:
– The world needs more people who do not have a
price at which they can be bought
– Who do not borrow from integrity to pay for
expediency
– Who are as honest in small matters are they are in
large ones
– Who know how to win with grace and lose with
dignity
10-19
Ethical Climates of Organizations
– Whose handshake is an ironclad contract
– Who are not afraid to go against the grain of
popular opinion
– Who are occasionally wrong and always willing to
admit it
• In short, the world needs leaders