Ethical Decision Making and Ethical Leadership C H A P T E R 5 Ethical Decision Making and Ethical Leadership

The Ethical Decision Making Process In business, people make decisions differently than at home Organizational pressures The ethical decision making process in business includes ethical issue intensity, individual factors, and organizational factors, such as corporate culture and opportunity Source: Triangle Images

Framework for Understanding the Ethical Decision Making Process in Business

Ethical Issue Intensity Ethical issue intensity is the perceived relevance or importance of an ethical issue to the individual, work group, and/or organization Reflects the ethical sensitivity of the individual or work group Triggers the ethical decision process Moral Intensity relates to a person’s perception of social pressure and the harm the decision will have on others

Individual Factors People often base their decisions regarding ethical issues on their own values and principles of right or wrong Research on gender and ethical decision making women are generally more ethical than males Education, Nationality, and Age are other individual factors Locus of control relates to individual differences in relation to a generalized belief about how one is affected by internal versus external events or reinforcements Can be external or internal

Organizational Factors Corporate culture is a set of values, norms, and artifacts that members (employees) of an organization share Those who have influence in a work group (e.g. managers, coworkers, subordinates) are referred to as significant others Obedience to authority helps to explain why many employees simply follow the directives of a superior Source: Digital Vision

Opportunity Describes the conditions in an organization that limit/permit ethical/unethical behavior Relates to individuals’ immediate job context Where they work, with whom they work, and the nature of the work Opportunities for misconduct can be reduced by establishing formal codes, policies, and enforced rules Source: Triangle Images

Items that Employees Pilfer in the Workplace

Business Ethics Evaluations and Intentions Ethical dilemmas involve decision rules which are often vague or in conflict Critical thinking plays a key role A person’s intentions and the final decision on what action to take is the final step in the process If intentions and behavior are not consistent with ethical judgments, the individual may feel guilt Most businesspeople will make ethical mistakes

Using the Framework to Improve Ethical Decisions It is impossible to objectively determine right and wrong Having a thorough knowledge about how ethical decisions are made will not solve ethical problems Business ethics involves value judgments and collective agreement about acceptable patterns of behavior Ethical decision making in business does not rely strictly on the personal values and morals of individuals Organizations take on a culture of their own, which have a significant influence on business ethics

Leadership in Corporate Culture Leadership: The ability or authority to guide and direct others toward achievement of a goal Leaders are key to influencing an organization’s corporate culture and ethics Leadership styles influence organizational behavior Including employees’ acceptance of/adherence to organizational norms and values. Source: © Jack Hollingsworth/Corbis

The Managerial Role in Developing Ethics Program Leadership

Leadership Styles Coercive leaders Authoritative leaders Affiliative leaders Democratic leaders Pacesetting leaders Coaching leaders The most successful leaders do not rely on one style of leadership but alternate their technique based on the characteristics of the situation. Source: Stockybte

Types of Leaders Transactional leaders create employee satisfaction through bartering for desired behaviors/performance Transformational leaders raise employees’ commitment and foster trust and motivation Transformational ethical leadership is best suited for organizations with high ethical commitment among employees and strong stakeholder support for an ethical culture

Habits of Strong Ethical Leaders

Challenges of Leadership Being a leader today is more complex and difficult than ever.