Professional and Business Ethics

Name: Professional and Business Ethics
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Description: Professional and Business Ethics

Professional and Business Ethics
Prof. Peter Hadreas Spring, 2014 Course Website: 1 1

Ethics as Organizational Culture
Corresponds to chapter five of Nelson and Treviño textbook. 2 2

ANSWER KEY FOR SECOND MIDTERM
Question Numbers 1. C 2. A 3. C 4. D 5. A 6. C 7. A 8. D 9. E 10. A 11. C 12. E 13. A 14. B 15. E 16. E 17. D 18. E 19. E 3

LETTER GRADE EQUIVALENCE FOR SECOND MIDTERM SCORES
B+ B B- C+ C D+ 4

Big Box Retailers, Walmart, Target and Costco have very different cultures.
Walmart: anti-union stance, foreign product sourcing, full-time Wal-Mart employees earn average of $10.78 per hour, but starting pay can be lower. Wal-Mart's high annual turnover-rate of ~70%, arguably shows that workers are dissatisfied. Target: differentiates itself from Wal-Mart by offering more upscale, trend-forward merchandise; different customer base from Wal-Mart: about 80% have attended college and 48% have completed college; supports many philanthropic and environmental causes. Costco: warehouse club, focuses on selling products low cost in large volume. Costco Employee Agreement sets forth benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. As of March 2011, non-supervisory hourly wages ranged from $11.00 to $21.00 in the U.S. 85% of Costco's workers have health insurance as compared with less than 50% at Wal-Mart and Target. 5 5

How Desirable Are Ethical Cultures to Employees?
“A 2006 study found that 82 percent of Americans would actually prefer to be paid less but work for an ethical company than be paid more but work for an unethical company. Importantly, more than a third of people say that they’ve left a job because they disagreed with the company’s ethical standards. So having an strong ethical culture is an important way to retain the best employees.” “The Business Effect of Ethics on Employee Engagement,” LRN Ethics Study, 2006, cited in textbook, p. 155. 6 6

Ethical Culture: Multisystem Framework
FORMAL SYSTEMS INFORMAL SYSTEMS Executive Leadership Role Models/Heroes Selection Systems Policies/Codes Norms Orientation/Training Ethical and Rituals Performance Mgmt Unethical Myths/Stories Authority Structure Behavior Language Decision Processes Alignment? Treviño and Nelson textbook, p. 153. 7 7

Misalignment of formal and informal culture systems.
“. . . if the same organization touts its honesty in its values statement but regularly deceives customers in order to land a sale, and the organization gives a highly ‘successful’ but highly deceptive sales representative the firm’s sales award, the organization’s formal and informal systems are out of alignment Employees perceive that deceit is what the organization is really about, despite what the ethics code says.” textbook, p. 154. 8 8

FORMAL SYSTEMS: Executive Leadership 9 9

Executive Ethical Leadership Is about Reputation, Which Rests
On These Two Pillars Moral Person Moral Manager Tells followers Tells followers how they should how good leader behave and holds behaves them accountable Traits Role Modeling Honesty Takes visible ethical Integrity action Trust Behaviors Rewards/Discipline Openness Holds people Concern for people accountable for Personal morality ethical conduct Decision-making Communicating Values-based An: “ethics and values” Fair message Treviño and Nelson textbook, p. 159. 10 10

Executive Ethical Leadership Reputation Matrix
_____________________________________ Moral Person _______________________ Weak Strong Moral Manager Hypocritical leader Ethical Unethical Ethically ? neutral leader Weak Strong Treviño and Nelson textbook, p. 159. 11 11

Legendary example of an Ethical Leader
“James Burke, former CEO of Johnson and Johnson, is probably the best known example of a highly visible ethical leader. Soon after being appointed CEO in the late 1970s, he challenged his senior managers to revisit and update the company’s age-old credo [the customer is its primary stakeholder]. Less than three years later, the Tylenol poisoning occurred.” “Seven people in the Chicago area were killed when they ingested Tylenol. (Tylenol tablets were laced with cyanide, but it was exterior sabotage – no fault of J&J itself.) J&J pulled 31 million bottles off the shelf with a retail value of $100 million, sent messages explaining the situation to over 500,000 doctors, hospitals and distributors of Tylenol. James Burke and other executives were accessible to the press and interviewed by the media.” textbook, pp. 160 and 365. 12 12

James Burke Fortune magazine named him as one of the ten greatest CEOs of all time and he has a membership in the National Business Hall of Fame. 13 13

Example of an Unethical Business Leader
“In interviews, senior executives cited Al Dunlap as a senior executive with a reputation for unethical leadership When hired at Sunbeam he was considered such a celebrity CEO that the stock price spiked 49 percent in one day. But while at Sunbeam, he was also known for ‘emotional abuse’ of employees – being ‘condescending, belligerent and disrespectful’ Dunlap also demanded that employees make numbers at all costs, and he rewarded them handsomely for doing so Dunlap also lied to Wall Street In 2002 Dunlap paid a $500,000 fine and agreed that never again would he be an officer or director of a public company.” textbook, p 14 14

Al Dunlap 15 15

Example of an Hypocritical Business Leader
“Jim Bakker remains the best public example of hypocritical leadership. In the late 1970s and early 1980s, Bakker built Praise the Lord (PTL) ministry into one of the world’s biggest religious broadcasting empires. At its peak, Bakker’s television ministry reached more than 10 million homes and had 2,000 employees. Bakker, along with his wife, Tammy Faye, claimed to be doing ‘the Lord’s work’ he raked in millions of dollars, convincing the faithful to purchase a limited number of lifetime memberships in two hotels The hotels were never completed. The funds donated for these projects were being tapped to support operating expenses, including huge salaries and bonuses for the Bakkers in 1989 Bakker was convicted on fraud and conspiracy charges. He spent eight years in prison.” textbook, pp. 162. 16 16

Jim Bakker 17 17

Example of an Ethically Neutral or ‘Silent’ Business Leader
“ [Sandy] Weill [former CEO of Citigroup] exemplified ‘ethically neutral’ leadership ‘Citi helped Enron hide debt; Salomon [a Citigroup unit] peddled worthless WorldCom debt . . .” “Being tone deaf on ethics issues is exactly what ethically neutral leadership is about ” “He [Weill] said a CEO relies on ‘very competent people’ and trusts them to do a good job. In the case of ethics management, that meant leaving it to the executives running Citi’s various businesses. If the head of a division thought ethics was important, ethics got resources and attention. If the head didn’t promote ethics, attention turned elsewhere, and most likely to financial performance goals. So, with a kind of benign neglect, Weill sat on the sidelines and provided little ethical leadership.” textbook, p 18 18

Sandy Weill 19 19

Ethical Culture: Multisystem Framework (Again)
FORMAL SYSTEMS INFORMAL SYSTEMS Executive Leadership Role Models/Heroes Selection Systems Policies/Codes Norms Orientation/Training Ethical and Rituals Performance Mgmt Unethical Myths/Stories Authority Structure Behavior Language Decision Processes Alignment? Treviño and Nelson textbook, p 20 20

Ethical Culture: Multisystem Framework Explained
FORMAL SYSTEMS Executive Leadership: Ethical, Unethical, Hypocritical, Neutral? Selection Systems: “ formal systems in place for recruiting and hiring new employees.” May shape a culture by preferring character types: Southwest Airlines employees, including pilots, for example, are selected on the basis of their cheerfulness, optimism and team spirit among other credentials. Treviño and Nelson textbook, p. 166 21 21

FORMAL SYSTEMS Executive Leadership: Ethical, Unethical, Hypocritical, Neutral? Policies/Codes: Ethics codes usually address basic prloblems such as respectful treatment of others, conflicts of interest, expense reporting, and giving and receiving gifts. Policy manuals are lengthier than codes and cover a multitude of job situations that are specific to the industry. QUESTION Consider SJSU codes about cheating and plagiarism. When are SJSU ‘academic integrity’ codes effective, when not.? Treviño and Nelson textbook, p. 169 23 23

Ethical Culture: Multisystem
Orientation/Training; Again Alignment with Informal System is Key. “ a young man who worked in mortgage lending in 2006 said that his company had provided a high quality week-long training program to prepare him for the job he was told to advise clients to be sure they could afford their payments and to avoid incurring additional credit card debt. But when he returned to the office, his ‘mentor’ (who had been in the job only six month longer than he had) told him that all that mattered was closing the deal and that ‘advising’ clients was a waste of time.” Treviño and Nelson textbook, p. 171. 25 25

FORMAL SYSTEMS INFORMAL SYSTEMS Executive Leadership Role Models/Heroes Selection Systems Policies/Codes Norms Orientation/Training Ethical and Rituals Performance Mgmt Unethical Myths/Stories Authority Structure Behavior Language Decision Processes Alignment? Treviño and Nelson textbook, pp 26 26

FORMAL SYSTEMS Performance Management: ways that individual and group rewards and discipline are connected with employee behavior. Treviño and Nelson textbook, p. 171. 27 27

Performance management: Again it’s key that it’s in alignment with informal systems. “ imagine a corporation where everyone knows that the top sales representative’s sales depend upon lying to customers about delivery dates despite ethics codes talk about customer satisfaction as a key value Members of the sales force recognize that information about what is rewarded carries the ‘real’ cultural message, and so the code becomes meaningless.” QUESTION What are the performance manage systems in place in most classrooms as SJSU? Treviño and Nelson textbook, p. 173 28 28

FORMAL SYSTEMS Organizational Authority Structure: How is power and responsibility distributed in the organization? Formal assignment of power and responsibility is described by the organization chart. Most companies are ‘bureaucratic,’ that is, a hierarchy of authority. There are many varieties of hierarchical organizations. Basic differences concern the division into main company functions and the amount of people who doing similar tasks. Organization of companies may also be horizontal or ‘flat’ matrix 30 30

FORMAL SYSTEMS Organizational Authority: Hierarchical Hierarchical organizations may be helpfully conceived (roughly) pyramidal. They are made of up several levels of power with the greatest amount of power at the top that involves fewer executives and at the base involving, generally, a greater amount of employees. 31 31

FORMAL SYSTEMS Organizational Authority: Hierarchical 32 32

FORMAL SYSTEMS Organizational Authority: Hierarchical “Staff and Line” 33 33

FORMAL SYSTEMS Organizational Authority: Hierarchical “Staff and Line” 34 34

FORMAL SYSTEMS Organizational Authority: Hierarchical Agency Department System 35 35

FORMAL SYSTEMS Organizational Authority: Flat or Horizontal: few or no levels of middle management between staff and executives 36 36

FORMAL SYSTEMS Organizational Authority: Matrix: individuals are managed through more than one reporting line. 37 37

How Desirable Are Ethical Cultures to Employees?
“A 2006 study found that 82 percent of Americans would actually prefer to be paid less but work for an ethical company than be paid more but work for an unethical company. Importantly, more than a third of people say that they’ve left a job because they disagreed with the company’s ethical standards. So having an strong ethical culture is an important way to retain the best employees.” “The Business Effect of Ethics on Employee Engagement,” LRN Ethics Study, 2006, cited in textbook, p. 155. 38 38

FORMAL SYSTEMS Organizational Authority: “Research has found that the more a firm demands a unquestioning obedience to authority, the higher the unethical conduct among employees, the lower the tendency to seek ethical advice about ethical issues, and the lower the likelihood that employees would report violations or deliver ‘bad news’ to management.” textbook, p. 176 39 39

FORMAL SYSTEMS Decision-making Processes: Overreliance on quantitative analysis. A company can arrive at the judgment that it’s cheaper to pay compensation claims than to develop safer conditions. McWane Co., as we shall see, is an extreme example of this line of thinking. II. Burden of Proof. Does company try as a rule to show a product is safe, or not unsafe. Engineers of the space shuttle Challenger were forced to go along with the launch because they couldn’t supply hard evidence that the launch was unsafe; although they had strong doubts that it was safe. textbook. pp 41 41

INFORMAL SYSTEMS Role Models and Heroes: Heroes are symbolic figures who set standards of performance by modeling certain behaviors, and they can be the organization’s formal leaders. Heroes can also be founders who are not longer even present in the organization.” textbook, p. 179. 42 42

INFORMAL SYSTEMS Role Models and Heroes: Steve Jobs (1955 –2011) Given up for adoption as a baby, Jobs was raised in California. Jobs owned millions of shares in Apple and Disney, and while he was known as a demanding boss, he dresses simply, speaks with an even, humble tone, and has won many awards, including the National Medial of Technology, CEO of the Decade, and others. 43 43

INFORMAL SYSTEMS Norms: “The Way We Do Things Around Here” Norms are standards of behavior that are accepted as appropriate by member of a group. Can apply to clothes. IBM for many years had a formal dress code. Men wore dark suits, white shirts, and polished shoes. At Apple computer T-shirts, jeans and tennis shoes are the norm. textbook, p. 181. 44 44

INFORMAL SYSTEMS Rituals: They are ways of affirming and communicating a culture in a tangible way. For example, “[s]ome companies have annual ‘bring your child to work days’ that encourage employees to value time with their families. Some have on-site child care so that having lunch with your preschool child in the company cafeteria becomes a valued daily ritual and symbol of the extent to which the organization values family. textbook, p. 181. 45 45

INFORMAL SYSTEMS Myths/Stories: At IBM, a story that has been told and retold describes how a low-level employee denied Tom Watson, then IBM president, entry into a restricted area of the company because Watson was not wearing his IBM identification badge. Watson praised the employee, suggesting the importance of upholding company rules and applying them to everyone.” textbook, pp 46 46

INFORMAL SYSTEMS language: Typical way of avoiding what may be an ethical decision is to use euphemisms such as ‘downsizing,’ ‘rightsizing,’ restructuring,’ and ‘targeted outplacement.’ QUESTION When the DOW Jones averages drops 1500 points in a quarter and that’s referred to as a ‘correction’ would you say that’s a euphemism. textbook. pp 47 47

Slide# 30: simple Hierarchical Organijzational Chart: http://www
Slide # 31: Agency Department Chart, Slide 32: staff and line organization chart: Slide 33: staff and line organizartional chart: Slide #34: flat or horizontal organizational chart: slide #35: chart of matrix organization:

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