Factors Affecting Ethical Choices

When managers are accused of lying, cheating, or stealing, the blame is usually is placed on the individual or on the company situation. Most people believe that individuals  make eth- ical choices because of individual integrity, which is true, but it is not the whole story. Ethi- cal or unethical  business practices usually reflect the values, attitudes, beliefs, and behavior patterns of the organizational culture; thus, ethics is as much an organizational as a personal issue.20 Let’s examine how both the manager and the organization  shape ethical decision making,21 as shown  in the Benchmarking Box.

1. THE MANAGER

Managers bring specific personality and behavioral traits to the job. Personal needs, family influence, and religious background all shape a manager’s value system. Specific personality characteristics,  such as ego strength, self-confidence,  and a strong sense of independence, may enable managers to make ethical decisions.

One important  personal trait is the stage of moral development.22 A simplified version of one model of personal moral development is shown in Exhibit 4.2. At the preconventional level, individuals are  concerned   with external rewards and punishments and obey authority  to avoid detrimental per- sonal consequences. In an organizational context, this level may be associated with managers who use an autocratic  or coercive leadership style, with employ- ees oriented toward dependable accom- plishment of specific tasks.

At level two, called the conventional level, people learn to conform to the ex- pectations of good  behavior  as defined by colleagues, family, friends, and soci- ety. Meeting social and interpersonal obligations is important. Work group collaboration is the preferred manner for accomplishing organizational goals, and managers use a leadership  style that en- courages interpersonal  relationships  and cooperation.

At the postconventional, or principled, level, individuals  are guided by an in- ternal set of values and standards and even  will disobey  rules or laws that violate these principles. Internal values become more  important  than  the expectations of significant others. An example of  the  postconventional  or principled approach comes from World War II.  When the USS Indianapolis sank after being torpedoed, one Navy pilot disobeyed orders and risked his life to save men who were being picked off by sharks. The pilot was operating  from the highest level of moral development  in  attempting the rescue  despite   a  direct order from superiors.

When  managers operate from this highest level of development, they use transformative or servant leadership, focusing on the needs of followers and encouraging others to think for themselves and to engage in higher levels of moral reasoning. Employees are empowered and given opportunities for constructive participation in governance of the organization.

The great majority of managers operate at level two, the conventional  level. A few have not advanced beyond level one. Only about 20 percent of American adults reach the level- three stage of moral development. People at level three are able to act in an independent, ethical manner regardless of expectations from others inside or outside the organization. Managers at level three of moral development will make ethical decisions whatever the organizational consequences for them.

One interesting study indicates that most researchers fail to account for the different ways  in which women view social  reality and develop psychologically  and have  thus consistently  classified women  as being stuck at lower levels of development. Researcher Carol Gilligan suggested that the moral domain be enlarged to include responsibility and care in relationships. Women may, in general, perceive moral complexities more astutely than men and make moral decisions based not on a set of absolute rights and wrongs but on principles of not causing harm to others.23

Globalization makes ethical  issues even more complicated for today’s managers.24 For ex- ample, although tolerance for bribery is waning, bribes are still considered a normal  part of doing business in many foreign countries. Transparency International,  an international  orga- nization that monitors corruption,  publishes an annual report ranking countries according to how many bribes are offered by their international businesses. Exhibit 4.3 shows results of the organization’s most recent available report. International businesses based in countries such as Russia, China, Taiwan, and South Korea were found to be using bribes “on an exceptional and intolerable  scale.” Multinational firms in the United States, Japan, France, and Spain, however, also revealed a relatively high propensity to pay bribes overseas.25

American  managers working  in foreign  countries require sensitivity  and an openness to other systems, as well  as the fortitude to resolve these difficult issues. Companies that don’t oil the wheels of contract negotiations in foreign countries can put themselves at a compet- itive disadvantage, yet managers walk a fine line when  making  deals overseas. Although U.S. laws allow certain types of payments, tough federal antibribery  laws also are in place. Goldman Sachs got preapproval  from the U.S. Justice Department  and the Securities and Exchange Commission (SEC) before agreeing to pay a $67 million fee to Beijing power brokers to facilitate a  joint venture in China.26 But many other companies, including Monsanto, ScheringPlough, and IBM, have gotten into trouble with the SEC for using incentives to facilitate foreign deals.

2. THE ORGANIZATION

Rarely can ethical or unethical corporate actions be attributed  solely to the personal values of a single manager. The values adopted within the organization are important,  especially when we understand that most people are at the level-two  stage of moral development, which means they believe their duty is to fulfill obligations and expectations of others.

Consider, for example, how David Myers slid into trouble at WorldCom, which disinte- grated in an $11 billion fraud scandal.27

Research verifies that these values strongly  influence  employee actions and decision making.28 In particular,  corporate culture, as described   in Chapter 3, lets employees know what beliefs and behaviors the company supports and those it will not tolerate.

If unethical behavior is tolerated or even encouraged, it becomes routine.  In many com- panies, employees believe that if they do not go along, their jobs will be in jeopardy or they will not fit in.29

Culture  can be examined to see the kinds of ethical signals transmitted  to employees. Exhibit 4.4 lists questions to ask to understand the cultural system. High ethical standards can be affirmed  and communicated through  public awards and ceremonies. Heroes provide role models that can either support or refute ethical decision making. Culture is not the only aspect of an organization that influences ethics, but it is a major  force because it de- fines company values. Other  aspects of the organization, such as explicit rules and policies, the reward system, the extent to which  the company  cares for its people, the selection sys- tem, emphasis on legal and professional standards, and leadership and decision processes, also can affect ethical values and manager decision making.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.