Business Ethics 4 - Understanding Factors Influencing Business Ethics PDF

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Business Ethics 4 (Semester 2, Year 1)

Business Ethics 4 – Understanding Factors Influencing Business Ethics Objectives 1. Ethical Decision Making 2. Ethical Decision Making – Individual Influences 3. Ethical Decision Making – Situational Influences 4. Managing Business Ethics

1. Ethical Decision Making Descriptive Business Ethical Theories describe how (un)ethical decisions are actually made in business situations and what influences the process and outcomes of those situations

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Normative ethical theories prescribe behavior

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Descriptive ethical theories describe behavior and how ethical decisions are made:

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Ethical and unethical decisions can be ma through a 4 step process:

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These decisions are influenced by two bro factor categories: o Individual = unique characteristics possessed by the individual makin the decision (age, gender, personality, education, attitudes) o Situational = features of context of situation (reward systems, roles and culture) and associated factors (intensity of the issue/decision)

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Business Ethics 4 (Semester 2, Year 1)

2. Ethical Decision Making – Individual Factors/Influences Values, Integrity and Background 

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Personal values are individual beliefs about desirable behaviors and goals that are stable over time. o values are about the behaviors and things that we deem important in life; ensuring wellbeing collectively and individually  family values; work ethic; environmental values; self-respect; equality Integrity is a person’s ability to adhere to a consistent set of moral principles or values o Living virtuously o Walking the talk – being consistent in actions and beliefs Background and experience: exposure to different environments o E.g. business and economics students cheat more!

Psychological Factors 

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Locus of control: the extent to which a person believes that they have control over the events in their life. o Internal = blame yourself o External = blame external reasons/others o A way of predicting moral behavior of people if you know what their general locus of control is like Moral imagination: the creativity with which one can reflect on an ethical dilemma. o Seeing beyond the rules of the game to find solutions o Rationalization can lead to bending morals etc (bad)

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Business Ethics 4 (Semester 2, Year 1)

3. Ethical Decision Making – The Role of Context  Organizational culture and context Incentives: The systems of reward and punishment within the organization.  E.g. o Employee 1 achieves a 20% increase using hard work o Employee 2 achieves a 25% increase by use of cheating o Employee 2 gets promoted Authority: the exercise of hierarchical power to compel a subordinate to act in a certain way.  “what is right in the organization is what the guy above you wants from you” o But what if the superiors, or the system, is corrupt? Informal Organization Effects 

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Peer effects: direct or indirect influence of similar others on one’s behavior (due to pressure or mere exposure) o Students in classroom o Stockbrokers in finance Routines: repeated patterns of behavior or interactions. Often mechanically performed activities or procedures. o Doping becomes a routine o Illegal downloads, copying the song from your friend In organizations, routines ensure stability and save time. o But… sometimes they hide ethical implications

Organization Culture Organizational Culture: The meanings, beliefs, and common-sense knowledge that are shared among members of an organization, and which are represented in taken-for-granted assumptions, norms, and values. 

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Work roles: functional and hierarchical o People adopt to the roles they are assigned to o Adopt to behavior different than what they exhibit in normal life o Phil Zimbardo’s Stanford experiment Bureaucracy: Suppresses morality by freeing the individual from moral reflection and decision-making. o Characterized by detailed rules and policies, set within impersonal hierarchies o They just need to follow the prescribed rules and procedures

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Business Ethics 4 (Semester 2, Year 1)

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 Behavioral issue-related factors Framing: The strategic use of language to alter meaning and/or behavior. Moral framing: The use of language to expose or mask the ethical nature of certain decisions. o Moving production to Bangladesh and paying taxes in Luxemburg?  Why call it tax or regulation avoidance of regulation. Frame it as a story of free markets. o Firing employees? Corporate restructuring OR massive lay-offs. o Military metaphors: “in a war with our competitors” o Moral framing can be easier in organizations than admitting moral issues, as that can lead to a breakdown of;- harmony, efficiency and authority of management Moral intensity: The relative importance (intensity) of the ethical issue. Depends on: o Magnitude of consequences (expected sum of harms/benefits) o Social consensus (do people agree that it’s un-ethical) o Probability of effect (will the harms/benefits actually happen) o Temporal immediacy (when will we see the consequences) o Concentration of effect (who bears the consequences) o Proximity (feeling of nearness) – social, cultural, psychological

 (Un)Ethical behavior in organizations is largely influenced by  Framing  Moral intensity

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Business Ethics 4 (Semester 2, Year 1)

4. Managing Business Ethics Business Ethics Management - Business ethics management is the direct attempt to formally or informally manage ethical issues or problems through specific policies, practices, and programs. o Changing the context; Making better environments 

Social accounting is the process concerned with assessing and communicating organizational activities and impacts on social, ethical, and environmental issues. (e.g. Sustainability reports, CSR reports) o Issues other than financial data o Audience extends beyond shareholders o Typically voluntary rather than mandated

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Business Ethics Management is the direct attempt to formally or informally manage ethical issues or problems through specific policies, practices, and programs. o Mission or values statements o Codes of ethics/ conduct o Reporting and advice channels o Ethics managers, committees, and consultants o Ethics education and training o Stakeholder consultation / partnership o Social auditing, accounting, and reporting

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Codes of Ethics/Conduct: Statements that commit an organization, industry, or profession to specific beliefs, values, and actions – and/or that set out appropriate ethical behavior for employees. o Design codes of ethics realistic with respect to the workplace o Design specific codes of ethics - without ambiguity or gray zones o Decrease psychological distance (increase immediacy) o Reminders make codes salient o Make it about money, instead of things (e.g. stocks) o Lead by example “Directors tend to set the tone for the actions of all employees; something like parents setting the tone within a family, kids do what their parents DO, not necessarily what they tell them” (Forbes) o Manage the systems of rewards, and the organizational culture  You can intervene to change (un)ethical practices in organizations:  Social accounting: first measure, then manage  Business ethics management: o Designing effective codes of conduct, Using behavioral insights, Manage the formal and the informal organization

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