1. CHAPTER 3 MANAGING ETHICS AND DIVERSITY
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2. Learning Objectives (1 of 2)
3-1. Illustrate how ethics help managers determine the right way to behave when dealing with different stakeholder groups Explain why managers should behave ethically and strive to create ethical organizational cultures Appreciate the increasing diversity of the workforce and of the organizational environment.

3. Learning Objectives (2 of 2)
3-4. Grasp the central role that managers play in the effective management of diversity Understand why the effective management of diversity is both an ethical and a business imperative Understand the two major forms of sexual harassment and how they can be eliminated.

4. The Nature of Ethics (1 of 2)
Ethical Dilemma
A type of quandary in which people have to decide if they should act in a way that might help another person or group even though doing so might go against their own self-interest
An ethical dilemma often involves deciding which course of action is the lesser of two evils. A manager might be asked to make a decision that, although it will benefit one person, it might also inflict harm on another.

5. The Nature of Ethics (2 of 2)
The inner-guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the “right” or appropriate way to behave
Ethics will guide a manager to what is inappropriate behavior and to what actions to take in order to avoid harming another person

6. Stakeholders and Ethics
The people and groups that supply a company with its productive resources and so have a claim on and a stake in the company
Ethics matter to stakeholders because often they directly benefit or are harmed by ethical decisions managers make.

7. Types of Company Stakeholders
Figure 3.1
Jump to Appendix 1 long description.

8. Stockholders
Stockholders want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation. They want to maximize their return on investment.
Because stockholders want to maximize the return on their investment, they watch the company and its managers closely to ensure that management is working diligently to increase the company’s profitability.

9. Managers
Managers are responsible for using a company’s financial capital and human resources to increase its performance and thus its stock price. They have the right to expect a good return or reward by investing their human capital to improve a company’s performance. Frequently managers juggle multiple interests.
Sometimes difficult decisions challenge managers to uphold ethical values because some decisions that benefit certain stakeholder groups (managers and stockholders) harm other groups (individual workers and local communities). For example, in economic downturns or when a company experiences performance shortfalls, layoffs may help cut costs (thus benefiting shareholders) at the expense of the employees laid off.

10. Topics for Discussion (1 of 5)
When are ethics and ethical standards especially important in organizations? [LO 3-1]
It may be difficult for managers to determine how to apportion harms or benefits among various stakeholder groups. In such cases, ethical standards and guidelines are very important. For example, when companies experience great financial losses, they often engage in massive layoffs, without considering ways to make such layoffs as painless as possible. It may also be difficult for managers to determine how to fairly apportion benefits among stakeholder groups, especially when management is one of the stakeholder groups that may be positively impacted. For example, when Chrysler amassed $9 billion in cash, managers wanted to use the money to protect the company against future economic downturns, a tactic that would give the managers themselves security. However, stockholders felt that managers were making the wrong decision, and some of this wealth should be shared with them.
Ethics and ethical standards are especially important in organizations when decision making is not governed by legal or governmental requirements. Because behavior considered unethical in the United States may be acceptable in foreign countries, international managers may also need guidelines to apprise them of ethical standards in the States. Also, managers must keep ethical standards in the forefront of their minds when working in situations of intense pressure.

11. Employees
Companies can act ethically toward employees by creating an occupational structure that fairly and equitably rewards employees for their contributions.
Employees should feel that the recruitment, training, performance appraisal, and reward systems used by organizations do not discriminate against employees and are fair.

12. Suppliers and Distributors
Suppliers expect to be paid fairly and promptly for their inputs. Distributors expect to receive quality products at agreed-upon prices.
Safety specifications are governed by the contracts a company signs with its suppliers and distributors—lax oversight can have tragic consequences.

13. Customers
Customers are the most critical stakeholder. Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones.
By selling quality products at a fair price and providing good after-sales service, a company can create loyal customers. Striving to improve their products over time and provide guarantees to customers about the integrity of their products, will also ensure a loyal customer base.

14. Community, Society, and Nation
Physical locations in which companies are located
towns or cities
or social milieus,
ethnic neighborhoods
Community provides a company with the physical and social infrastructure that allows it to operate.
Through the salaries, wages, and taxes it pays, a company contributes to the economy of its town or region and often determines whether the community prospers or declines. Similarly, a company affects the prosperity of a society and a nation and, to the degree that a company is involved in global trade, all the countries it operates in and thus the prosperity of the global economy.

15. Jump to Appendix 2 long description.
Four Ethical Rules
Figure 3.2
Utilitarian Rule
Decision that produces the greatest good for the greatest number of people.
How do you measure the benefits and harms that will be done to each stakeholder group?
How do you evaluate the rights and importance of each group?
Moral Rights rule
Decision that best maintains and protects the fundamental or inalienable rights and privileges of the people affected by it.
Justice rule
Decision that distributes benefits and harms among people and groups in a fair, equitable, or impartial way.
Practical rule
Decision that a manager has no hesitation about communicating to people outside the company because the typical person would think it is acceptable.
Jump to Appendix 2 long description.

16. Practical Decision Model
Does my decision fall within the acceptable standards that apply in business today?
Am I willing to see the decision communicated to all people and groups affected by it?
Would the people with whom I have a significant personal relationship approve of the decision?
The practical rule is that an ethical decision is one that a manager has no hesitation or reluctance about communicating to people outside the company because the typical person in a society would think it is acceptable. Applying the practical rule to analyze a business decision ensures that managers are taking into account the interests of all stakeholders.

17. Why Should Managers Behave Ethically? (1 of 2)
The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way.
The text uses the example of an agricultural community in which all have an equal right to the common land: “Pursuing self-interest, each farmer acts to make the maximum use of the free resource by grazing his or her own cattle and sheep. Collectively, all the farmers overgraze the land, which quickly becomes worn out. Then a strong wind blows away the exposed topsoil, so the common land is destroyed. The pursuit of individual self-interest with no consideration of societal interests leads to disaster for each individual and for the whole society because scarce resources are destroyed.”

18. Some Effects of Ethical/Unethical Behavior
Figure 3.3
Jump to Appendix 3 for the long description.

19. Why Should Managers Behave Ethically? (2 of 2)
Trust
Willingness of one person or group to have faith or confidence in another person’s goodwill, even though this puts them at risk
Reputation
Esteem or high repute that individuals or organizations gain when they behave ethically
The trustworthy actions of one person in a company can encourage others to act in the same manner, generating trust been all and leading to an efficient and effective organization.

20. Sources of an Organization’s Code of Ethics
Figure 3.4
Societal Ethics
Standards that govern how members of a society should deal with each other on issues such as fairness, justice, poverty, and the rights of the individual. People behave ethically because they have internalized certain values, beliefs, and norms.
Professional Ethics
Standards that govern how members of a profession are to make decisions when the way they should behave is not clear-cut—medical and legal ethics.
Individual Ethics
Personal values and attitudes that govern how individuals interact with other people.
Jump to Appendix 4 for long description.

21. Ethical Organizational Cultures (1 of 2)
Managers can ensure that important ethical values and norms are a central component of an organization’s culture. Managers become ethical role models whose behavior is scrutinized by their subordinates.
Managers can not only use the organizations code of ethics in a decision-making process, but they can also create a culture that supports ethical values and norms. The text uses the example of Herb Kelleher and Southwest Airlines’ culture.

22. Topics for Discussion (3 of 5)
How can managers ensure that they create ethical organizational cultures? [LO 3-2]
Leading by example is the primary way by which managers can ensure that an ethical organizational culture is created. Because employees expect those in authority to provide leadership and set an example, managers must behave as role models of ethical conduct, knowing that subordinates scrutinize their behavior. In addition, managers can encourage an ethical culture by establishing a code of ethics and by hiring an ethics ombudsman with organization-wide authority.

23. Ethical Organizational Cultures (2 of 2)
Ethics Ombudsman
An ethics officer who monitors an organization’s practices and procedures to be sure they are ethical
The ethics ombudsman communicates ethical standards to all employees, creates systems to monitor employees’ adherence, and trains how to respond to ethical dilemmas appropriately.

24. The Increasing Diversity of the Workforce and the Environment
Differences among people due to age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background, education, experience, physical appearance, capabilities, disabilities, and any other characteristic used to distinguish people
An important factor in an organization, if not dealt with properly, diversity can have devastating effects on a company. In a global environment it is critical for an organization to be aware and to address diversity properly.

25. Diversity Concerns (1 of 2)
There is an ethical imperative for equal opportunity. Effectively managing diversity can improve organizational effectiveness. There is evidence that diverse individuals continue to experience unfair treatment in the workplace as a result of biases, stereotypes, and overt discrimination.

26. Diversity Concerns (2 of 2)
Glass Ceiling
A metaphor alluding to the invisible barrier that prevents minorities and women from being promoted to top corporate positions
Glass Ceiling Commission, a federal commission, noted:
African-Americans experience the lowest promotion rate and had the most difficult time climbing the corporate ladder,
Asians were stereotyped into technical jobs and
Hispanics were assumed to have less education than other minority groups.

27. Sources of Diversity in the Workplace
Figure 3.5
Jump to Appendix 5 long description.

28. Workforce Diversity: Age
Aging U.S. Population
Median age is 37.8.
By 2030, 20% of the population will be over 65.
Federal Age Discrimination Laws
1964 Title VII of the Civil Rights Act of 1964
1967 Age Discrimination in Employment Act
Managers need to be vigilant to ensure that employees are not discriminated against because of age. Moreover, managers need to ensure that the policies and procedures they have in place treat all workers fairly, regardless of their ages.

29. Workforce Diversity: Gender
Women in the Workplace
U.S. workforce is 44.3% female.
Women’s weekly median earnings are $726 compared to $895 for men.
Women hold only 14.6% of executive officer positions in the 500 largest U.S. companies.
Research conducted by consulting firms suggests:
Female executives outperform their male colleagues in skills such as motivating others, promoting good communication, turning out high-quality work, and being good listeners.
Hagberg Group performed in-depth evaluations of 425 top executives in a variety of industries, with each executive rated by approximately 25 people. Of the 52 skills assessed, women received higher ratings than men on 42 skills, although at times the differences were small.

30. Workforce Diversity: Race and Ethnicity
Grouping of people based on some shared characteristic such as national origin
Ethnic Demographics of United States
72.4% white
16.3% Latino
12.6% African American
4.8% Asian
It is important to manage diversity effectively.
Bureau of Labor Statistics: much to be done still.

31. Workforce Diversity: Religion
Accommodation for Religious Beliefs
Scheduling of critical meetings
Providing flexible time off for holy days
Posting holy days for different religions on the company calendar
Managers can gain employee loyalty by being respectful of religious differences and by making even the smallest accommodation for religious diversity.
Example: allowing employees to leave work early on certain days instead of taking a lunch break or posting holidays for different religions on the company calendar can go a long way toward making individuals of diverse religions feel respected and valued as well as enabling them to practice their faith.

32. Workforce Diversity: Capabilities and Disabilities
Disability Issues
Providing reasonable accommodations for individuals with disabilities
Promoting a nondiscriminatory workplace environment
Educating the organization about disabilities
Managers must educate both themselves and their employees about the disabilities, as well as the real capabilities, of those who are disabled.
Example: during a Disability Awareness Week, administrators at the University of Notre Dame sought to increase the public’s knowledge of disabilities while heightening awareness

33. Topics for Discussion (5 of 5)
Why might some employees resent workplace accommodations that are dictated by the Americans with Disabilities Act? [LO 3-3]
Managers must often educate themselves and their employees concerning the disabilities and abilities of those who are disabled. Because many people are unaware of the prevalence of disabilities and misinformed about their consequences, they do not fully understand why accommodations are needed.
Unfortunately, there are anecdotes of employees abusing the ADA by seeking unneeded accommodations for disabilities that may not exist, which could lead to resentment by others. Worse yet, such abuse may prevent persons with real disabilities from revealing their disability so that they can receive the accommodations they deserve.

34. Workforce Diversity: Socioeconomic Background
Managers need to be sensitive and responsive to the needs and concerns of workers who might not be as well off as others.
Managers need to be aware of differences in income and financial resources, access to child care, elder care options, living situations, as well as the existence of sources of social and family support. Indeed, managers must endeavor to give such employees the opportunities to learn, advance, and make meaningful contributions to their organizations while improving their economic well-being.

35. Workforce Diversity: Sexual Orientation
Sexual Orientation Issues
Employment and workplace discrimination
Provision of domestic-partner benefits
Today, LGBT employees are increasingly having their rights affirmed and many companies are now offering employees with same-sex partners benefits.

36. Topics for Discussion (4 of 5)
Why are gay and lesbian workers and workers who test positive for HIV sometimes discriminated against? [LO 3-3]
Unfortunately, a great deal of prejudice against gays and lesbians exists in our society, and many have incorrectly labeled AIDS/HIV as a ‘gay’ disease. AIDS/HIV cannot be spread through casual contact. Yet out of fear, ignorance, or prejudice, some people wish to avoid all contact with anyone who has tested positive for the disease for fear of becoming infected.

37. Critical Managerial Roles
Managers have more influence than rank-and- file employees. When managers commit to diversity, their authority and positions of power and status influence other members of an organization to make a similar commitment.
Managers can model that diversity is a valued goal. They can institute policies and procedures that ensure equal treatment. And they can act in liaison roles.

38. Effectively Managing Diversity Makes Good Business Sense
The diversity of organizational members can be a source of competitive advantage. The recruiting of diverse employees must be followed up with ongoing effective management of diversity to retain those employees. Many organizations insist that their suppliers support diversity. Effective management of diversity is necessary to avoid costly lawsuits.
Target is one company that varies its products dependent on different cities or regions.

39. Forms of Sexual Harassment (1 of 2)
Quid Pro Quo
Asking for or forcing an employee to perform sexual favors in exchange for receiving some reward or avoiding negative consequences
Even though the threat of losing one’s job if not compliant with a demand to “sleep with me” is the extreme and probably the first thing one thinks of when discussing sexual harassment, quid pro quo can also be more subtle. It can also come in the form of being threatened with not receiving a raise or a promotion, having some other work-related opportunity held up as enticement, or receiving negative consequences such as demotion or dismissal.

40. Forms of Sexual Harassment (2 of 2)
Hostile Work Environment
Telling lewd jokes, displaying pornography, making sexually oriented remarks about someone’s personal appearance, and other sex-related actions that make the work environment unpleasant
A hostile work environment not only interferes with an employee’s ability to perform his or her job, it is also illegal. Ignoring or promoting a hostile work environment could risk costly lawsuit.

41. Steps to Eradicate Sexual Harassment (1 of 2)
Develop and clearly communicate a sexual harassment policy endorsed by top management. Use a fair complaint procedure to investigate charges of sexual harassment.
Prohibitions against both quid pro quo and hostile work environment sexual harassment should contain:
examples of types of behavior that are unacceptable,
a procedure for employees to use to report instances of harassment,
a discussion of the disciplinary actions that will be taken when harassment has taken place, and
(4) a commitment to educate and train organizational members about sexual harassment.

42. Steps to Eradicate Sexual Harassment (2 of 2)
When it has been determined that sexual harassment has taken place, take corrective action as soon as possible. Provide sexual harassment education and training to all organizational members, including managers.
As spoken of in the text, DuPont’s “A Matter of Respect” educates employees about sexual harassment and eliminates its occurrence. Employees participate in a four-hour workshop wherein sexual harassment is defined, the company’s policy against it is explained, and employees are told how to report complaints and access a 24-hour hotline.

43. BE THE MANAGER What are you going to do to address this issue?
You might meet with Susan to determine what kinds of problems she is aware of. To act without more information might create problems where none exists. If there is a problem, consider contacting the Human Resources Department for their advice and/or participation in responding to it, especially if it involves an actionable offense such as sexual harassment.
You may also engage in “management by walking around” to observe how workers interact with each other. You should not make a big deal of the visits, but they must occur with enough frequency to observe what is going in formal work settings as well as informal social settings. Gradually, your subordinates will become more comfortable with you, allowing you to observe behaviors that may be unapparent on the surface. You should encourage all subordinates to let you know about any problems they are experiencing.