Business Ethics and Management ControlProf. GURU PRASAD FACULTY INC GUNTUR
Ethical behavior in organizations Ethics deals with morality rules regarding behavior conduct. and and
In organizational set up , ethics can be defined as the rules or standards governing the conduct of individuals and organizations.
Ethical philosophy There are three different ethical philosophies that individuals follow under different situations in an organizational set-up. These are- utilitarianism, individual rights, and justice. Organizations attempt to ensure that their employees behave ethically by using control systems
Ethical philosophy The individual rights philosophy deals with safeguarding the rights of individuals, such as the right to be informed, right to free speech, right to free consent, the right to privacy, and the right to due process. Utilitarianism recommends that a course of action that achieves the greatest good for the greatest number of people is ethical
Ethical philosophy Justice requires that the rules of the organization be enforced fairly and impartially. Individuals should be accountable only for factors which are under their control. Utilitarianism is the most commonly followed ethical philosophy
Ethical decision ideology Ethical decision ideologies can be classified based on two dimensions: one is Idealism the belief that behaving ethically ensures positive results; and the other is Relativism the belief that moral values depend on circumstances.
Ethical decision ideology Based on these two dimensions, there are four classifications of ethical decision ideologies Absolutist, Exceptionist Situationist, and Subjectivist.
Ethical decision ideologies MatrixRelativismlow I D E A L I S M high
Ethical decision ideologies Matrix An Absolutist believes in strictly following the universally accepted ethical principles. An Exceptionist refers to universally accepted ethical principles for broad guidance rather than for strict adherence.
Ethical decision ideologies Matrix A Situationist takes a decision on a case to case basis by studying and comprehending the situation at hand. A Subjectivist prepare to abide by their respective individual ethical principles rather than adhering to universally accepted ethical principles
Influencing factors of Ethics Individual factors Organizational factors:4. 5. Culture and structure Performance measurement systems 6. Reward systems 7. Position related factors
Individuals with higher ego strengths will not depend on others for decisions making , whereas people with low ego strength will look to others for help in arriving at decisions
The culture of an organization includes its values, belief systems, and norms. It is influenced by the behavior of the mangers or the top management of the organizations
Performance measurement systems
The top management of sears auto centers developed incentive systems to improve revenue performance, and set targets for their employees that were practically unachievable. The employees therefore resorted to unethical actions by indulging in unnecessary and incomplete repairs of vehicles and overcharging for services. Finally , consumers initiated legal proceedings against the organization
Reward systems Reward system in many organizations tend to encourage unethical behavior like kickbacks. Also, some organizations tend to discourage and penalize whistleblowers; such punishment systems tend to further encourage unethical behavior. Reward systems should be integrated with the performance measurements systems.
Position related factors These are peer pressure, the expectations of the top management regarding achievement of objectives, the presence or absence of a code of conduct, superior-subordinate relationships, extent of resource availability, etc., For example, employees of departments like marketing and purchase tend to face more ethical dilemmas
Organizational factors If a specific ethical behavior is rewarded, employees will tend to continue behaving in that way. On the other hand, if any employee gets punished for a specific behavior , he and the others in the organization will not resort to that kind of behavior
Influencing factors of Ethics External environmental factors political economical factors social factors
Political and economical factors It include factors like government polices, tax structures, and the tariffs and duties levied on imports. Many organizations resort to bribing government officials to get contracts or licenses for businesses or to get into such transactions to stay in competitions. The case of Siemens AG officials routing organizational funds to an Italian energy company as bribes is an example of unethical behavior
Social factors Giving the right information to customers regarding products and services is one of the major ethical considerations that organizations must keep in mind. Being ethical serves as a competitive advantage for organizations, as it helps them build up a good reputation and image for themselves. Johnson and Johnson- faced a serious crisis, when a few capsules of its popular medicine, Tylenol were found to be laced with cyanide.
Integrated framework for ethical behavior
When the ethical/unethical behavior of an individual is rewarded or punished , these decisions become a part of the employee s decision history and this further influences the decisions and behavior of the employees.
External Environmental factors
Ethical philosophy & Decision ideology
Organizational Position related factors
Ethical Decision Making Ethical behavior Reinforcement/ Reward systems
MCA and Ethical issues
Budgetary slack Managing earnings Ethical issues in sales Ethical issues in operations Ethical issues in Human Resources
Budgetary slack Budgetary slack is a deliberate understatement of revenues and /or overstatement of expenses in the budget. Budgetary slack is caused by managerial intention rather than by an unforeseen error in the estimation process. The slack created by mangers may also be used for the organizations benefit during bad times
Managing earnings Corrupt managers tend to mange earnings for personal benefits . They try to show higher earnings in order to show that budgeted targets have been achieved. In united states , the Sarbanes Oxley act was enacted to act as an external control system to restrict such practices.
Ethical issues in sales The samples and gift adjustments in the pharmaceutical industry, where it is the practice to give samples of new products to doctors as a part of the sales promotion. These samples are given to the doctors so that they can try out the drug and also to help them in brand recall.
Ethical issues in operations Consuming more resources, providing for greater lead times, or accepting relatively poor quality . Focuses only on gaining maximum profit at minimum costs without taking social responsibilities into consideration. Neglecting the safety of employees. Having unhealthy and dangerous working conditions and passing off confidential information
Ethical issues in Human Resources
Lack of Job security Increased risk of unemployment Excessive scrutiny and control Discrimination Absence of proper appraisal methods Sexual harassment Recruiting on contract basis Force them to work longer hours
Regulating Ethical conductControl activity Mechanism to regulate ethical conduct Code of ethics Ethics committee Ethics training for employees Corporate governance focused on ethics
Indicating and communicating objectivesFeedback through performance measurement systems Reward systems integrated with objectives accomplishment
Ethics committee System of whistle blowing
Reward systems focused on ethics
Thank youTwo people can damage a society: the one who knows and doesn't talk and the one who doesn't know and talks -Mr. Peja (genci. K) A word of encouragement during a failure is worth more than an hour of praise after success. -Anonymous Common sense is not so common. -Jessica Truman Appear weak when you are strong, and strong when you are weak. - Sun Tzu
Ethics only can save you
BREAK THE SILENCE