The Individual in the Organization

8/4/2019 The Individual in the Organization

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THE INDIVIDUAL IN THEORGANIZATION

CORPORATION AND CORPORATE

SOCIAL RESPONSIBILITY


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THREE MODELS OF

ORGANIZATION

1. RATIONAL STRUCTURE

2. POLITICAL STRUCTURE

3. NETWORK OF PERSONAL

RELATIONS


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THE RATIONAL

ORGANIZATION This is the traditional model of business

organization.

an organization is the rational coordination of theactivities of a number of people for the achievementof some common explicit purpose or goal, throughdivision of labor and function and through a

hierarchy of authority and responsibility. (E.H.Schein)


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RATIONAL

ORGANIZATION

Most fundamental realities of the

organization are the formal hierarchies ofauthority identified in the organizational

chart and lines of authority in the

organization.

Board of Directors

VP Research VP Manufacturing VP Marketing

President


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RATIONAL

ORGANIZATION What holds together the many layers of employees

and managers and fixes these people onto the

organizations goals and formal hierarchy?Contracts.

With contractual agreements, employee has moralresponsibility to obey employer in pursuing

organizations goals, and the organization in turnhas moral responsibility to provide employee witheconomic supports it has promised.


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EMPLOYEES OBLIGATIONS

TO THE FIRM

Main moral duty: to work towards the goals

of the firm and to avoid activities whichmight harm those goals.

Unethical: to deviate from these goals to

serve ones own interests.


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EMPLOYEES OBLIGATION

TO T HE FIRM

Ways in which employee might fail to live

up to duty of pursuing goals of the firm: Acting on conflict of interest

Stealing from the firm

Using ones position as leverage to forceillicit benefits out of others through extortion

or bribery.


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Conflicts of Interest

Conflicts of interest arise when employee isengaged in a task on behalf of the company and

employee has private interest in the outcome of thetask (a) that is possibly antagonistic to the bestinterests of the firm, and (b) that is substantialenough to affect the independent judgment the firm

expects the employee to exercise on its behalf. Simply put, conflicts of interest arise when self-

interest of employees in positions of trust leadsthem to discharge their offices in ways that may not

be in the best interests of the firm.


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Conflicts of Interest

E.g. officer of corporation holds stock in one of thecompanies submitting bids for construction

contract. E.g. daughter-in-law is saleswoman for firm that

manufactures tools that my company purchaseseven if other firms offer better terms.

E.g. accountant working for insurance companyalso provides independent auditing for some of thefirms the insurance company insures.


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Conflicts of Interests

Conflicts of interest may be actual or potential.

Actual conflicts of interest are unethical because

they are contrary to the implied contract workerfreely accepts when taking the job.

Potential conflicts of interest may or may not beunethical depending on probability that employees

judgment will be affected

Conflicts of interest can be created by bribes andextortion, and gifts.


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Conflicts of interest

A commercial bribe is a consideration given oroffered to an employee by a person outside the firm

with the understanding that when the employeetransacts business for his or her own firm, theemployee will deal favorably with that person orwith the persons firm.

Commercial extortion is when employee demands aconsideration from persons outside the firm as acondition for dealing favorably with those personswhen employee transacts business for his or her

firm.


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Accepting gifts may or may not be ethical.

Factors to be considered in evaluating the morality

of accepting a gift (Vincent Barry):

1. What is the value of the gift? Substantial enoughto influence ones decisions?

2. What is the purpose of the gift? Intended as abribe? .

3. What are the circumstances under which the giftwas given? Given openly? To celebrate a specialevent?


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4. What is the position of the recipient of the gift?

In a position to influence the firms dealings with

the giver?

5. What is the accepted business practice in the

area? Part of an open and well-known industry

practice? 6. What is the company policy?

7. What is the law?


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Employee Theft

Employee has contractual agreement toaccept only certain specified benefits in

exchange for his labor and to use resourcesand goods of the firm in pursuit only of thelegitimate aims of the firm.

Therefore, to appropriate additional benefitsfor oneself or to convert company resourcesto employees own use are forms of theft.


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Employee Theft

E.g. stealing office supplies, tools, clothing

E.g. padding expense accounts

E.g. embezzlement, larceny, fraud in

handling of trusts or receiverships, forgery.

Immorality of such thefts is clear. What isnot clear always are thefts involving various

forms of information.


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Employee Theft

Computer Theft What is the ethics of using computer to gain entry

into companys data bank, copying companys

computer programs, using company computerduring ones own time, using or copying companyscomputerized data?

Unless authorized explicitly or through the

companys formal or informal policies, all suchactivities are unethical forms of theft since they allinvolve taking or using property that belongs tosomeone else without the consent of its rightful

owners.


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Employee Theft:

Computer Theft Computer theft best understood by considering

nature of property: property consists of bundle of

rights that attach to some identifiable asset: Right to exclusive use of asset

Right to decide whether and how others may usethe asset

Right to sell, trade, or give away the asset

Right to any income generated by the asset

Right to modify or change the asset.


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Employee Theft

Trade Secrets Trade secrets or propriety information consists of

nonpublic information such as

1) the firms activities, technologies, future plans,policies, or records which if known by competitorswould affect the firms ability to compete

2) owned by company (even if not patented or

copyrighted) because developed by company orpurchased for its private use

3) those explicitly indicated by the firm that it doesnot want anyone outside to have the information.


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Employee Theft

Trade Secrets Use of trade secrets by employees for their own

advantage is unethical because it is using property

of another agent for a purpose not sanctioned bythat other agent.

But the skills an employee acquires by working fora company do not count as trade secrets.

It is not easy though to distinguish skills from tradesecrets.

The firms property rights over trade secrets arelimited by rights of other agents, such as right to

know health risks associated with their job.


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Insider Trading

the act of buying and selling a companys stock on

the basis of inside information about the

company.

Inside or insider information about a company

is confidential, not available to general public but

which would have material or significant impact onthe price of the stock.

Is insider trading ethical or unethical?


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Insider Trading

Arguments of those who consider insider trading notunethical but actually socially beneficial:

1) When insiders trade stocks on their insideinformation, they in effect bring their information to themarket and ensuring market value of stocks accuratelyreflect their true underlying value.

2) Insider trading does not harm anyone. People sell

their stocks because they need or want the money at themoment, and they will get the current market price oftheir stock. And when price of stock rises due to insiderbuying, the people who will sell their stocks during this

period get more.


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Insider Trading

3) Untrue that insider has unfair advantage

over others because the fact is that many

people who buy and sell stocks have more or

better information than others. Nothing

unethical or unfair about having an

information advantage over others in thestock market.


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Insider Trading

Arguments why insider trading is unethical:

1) The information that insider trader uses is

information that does not belong to him but toshareholders, and therefore an act of stealing.

2) The information advantage of insider is unfair orunjust. Unfair because it is unjustly stolen from

others (unlike information advantage of stockexperts or analysts)the company owners whomade the investments.


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Insider Trading

3) Untrue that insider trading harms no one.

Effects of insider trading:

i) tends to reduce the size of the market, and withreduced market, a) decline in the liquidity of stocksbecause it is harder to find buyers and sellers forstock, b) increase in the variability of stock prices,

c) decline in markets ability to spread risk becauseof few parties, d) decline in market efficiency, e)decline in utility gains available to traders.


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Insider Trading

ii) increases the cost of buying and selling stocks in

the market (i.e. transaction cost) because the more

insiders there are, the more specialist must raise hisfees.

Thus, reasons to support the view that insider

trading is unethical are:it violates peoples rights; itis based on unjust informational advantage; and it

harms societys overall utility.


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THE FIRMS DUTIES TO

THE EMPLOYEE Basic moral obligation of employer to

employees: to provide them with

compensation they have freely and

knowingly agreed to receive in exchange for

their services.

Two main issues: fairness of wages and

fairness of employee working conditions.


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Wages

Factors to be considered in fair wage:

1. Going wage in the industry and in the area.

2. Firms capabilities

3. Nature of the job

4. Minimum wage laws

5. Relation to other salaries (salary structure)

6. Fairness of wage negotiations.


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Working Conditions: Health

and Safety Risks, an unavoidable part of many occupations. Employer

has duty to take steps to ensure worker is not being unfairlymanipulated into accepting a risk unknowingly, unwillingly,or without due compensation. In concrete:

1. Employers should offer wages that reflect risk-premiumprevalent in other similar but competitive labor markets.

2. Employer should provide employee with suitable health

insurance programs. 3. Employer should collect information on the health

hazards that accompany a given job and make this availableto workers.


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Working Conditions:

Job Satisfaction Job specialization often results in

dissatisfaction and mental injury.

Three determinants of job satisfaction:

1) experienced meaningfulness

2) experienced responsibility

3) knowledge of results


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Working Conditions: Job

Satisfaction To influence these 3 determinants, jobs must be

expanded along 5 dimensions:

1) skill variety 2) task identity: doing a job from beginning to end.

3) task significance: impact on lives of others

4) autonomy: degree to which job gives workerfreedom in scheduling work, how to carry it out.

5) Feedback


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Working Conditions:

Job Satisfaction In short, solution to job dissatisfaction lies in

broadening job horizontally by giving

employee wider variety of tasks and

deepening job vertically by allowing

employee more control over these tasks.


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THE POLITICAL

ORGANIZATION Political model of organization sees organization as

system of competing power coalitions and of formal

and informal lines of communication and influencethat radiate from these coalitions.

What counts is power: ability of individual or group

to modify the conduct of others in desired waywithout having ones own conduct modified in an

undesired way.


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POLITICAL

ORGANIZATION If power is basic reality in political

organization, ethical issues focus on moral

limits to the exercise of power withinorganization.

1) moral limits of manager over their

subordinates. 2) moral limits to power employees acquire

and exercise on each other.


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Political Organization:Employee Rights:

The Right to Privacy

The Right to Privacy: the right to be leftalone, in particular the right not to have

others spy on his or her private life.

Positively, the right of persons to determinethe type and extent of disclosure of

information about themselves. This right has become vulnerable with

development of recent technologies.


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Right to Privacy

Two types:

Psychological privacy with respect to persons

inner life.

Physical privacy with respect to persons physical

activities.

Purpose of rights: to enable individual to pursue hisor her significant interests and to protect these from

intrusions of other individuals.


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Right to Privacy

Right to privacy important because of protectivefunctions:

Protects us from being shamed, ridiculed,blackmailed or other harm.

Prevents others from interfering in our plans simplybecause they do not hold the same values we hold.

Protects those whom we love from being injured byhaving their beliefs in us shaken.

Protects us from incriminating ourselves.


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Right to Privacy

Right to privacy also important because of enablingfunctions:

Enables us to develop ties of friendship, love, and trust. Enables certain professional relationships to exist, e.g.

psychiatrist and patient.

Enables a person to sustain distinct social roles.

Enables people to determine who they are by giving themcontrol of the way they present themselves to society and topresent themselves in a special way to those whom theyselect.


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Right to Privacy

Right to privacy must be balanced against

other individuals rights and needs.

Employers have legitimate right to inquire

into activities of employees or prospective

employees, e.g. past applicants past work

experience, e.g. employer investigation ontheft or pilferage.


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Right to Privacy

Three elements to be considered when collectinginformation that may threaten employees right to privacy:

1) relevance: employers not justified in inquiring into anyareas of employees life that do not affect the employeeswork performance in a direct and serious manner.

Dividing line between justified and unjustified investigationclear with respect to lower level employees but not in higher

management hierarchy. Managers private activities or emotional instability can

damage firms reputation.


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Right to Privacy

2) Consent: firm justified in inquiring into

employees life only if employee has clear

understanding that inquiry is being made and

clearly consents to this as part of the job or

can freely choose to refuse the job.


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Right to Privacy

3) Methods must be both ordinary and reasonable. Extraordinary

methods unreasonable and unjustified unless circumstances are

extraordinary.

Use of extraordinary devices justified only on the following conditions:

1) the problem can be solved in no other manner.

2) problem is serious and the use of the means will identify the culprits

and put an end to the problem

3) use of devices not prolonged beyond the time needed. 4)all information uncovered but irrelevant be disregarded and destroyed.

5) rate of failure taken into account.


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Employees Rights:

Freedom of Conscience Freedom of conscience: individuals may not be

forced to cooperate in activities that they

conscientiously believe are wrong. Basis of this right: interest that individuals have in

being able to adhere to their religious or moralconvictions.

Due to absence of legal protection of this right,some have supported the practice ofwhistleblowing.


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Whistleblowing

Whistleblowing may be internal (reported only tothose higher in the organization) and external

(reported to individuals or institutions outside theorganization).

It is argued that whistleblowing is always wrongbecause employee has contract to be loyal to

employer and to keep all aspects of businessconfidential.

But contract is void if it requires employee to dosomething immoral.


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Whistleblowing

External whistleblowing morally justified if:

1) there is clear substantiated comprehensive evidence that

firm is engaged in activity seriously wronging or will wrongother parties.

2) reasonable attempt to prevent wrong through internalwhistleblowing have been tried and failed.

3) reasonably certain that external whistleblowing will

prevent the wrong 4) wrong is serious enough to justify injuries will probably

inflict on oneself, family and other parties.


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Whistleblowing

External whistleblowing may be justified but notobligatory. Obligatory only:

1) person has moral duty to prevent the wrongbecause it is part of persons professionalresponsibilities (e.g. accountant) or because no oneelse can or will prevent the wrong.

2) wrong involves serious harm to societys overallwelfare or a serious violation of basic moral rightsof an individual or group, or a serious injusticeagainst a person or group.


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Whistleblowing

External whistleblowing is a symptom of astructural problem: employees have no mechanism

to voice their concerns through internalwhistleblowing.

Even with open door policies, fear of reprisal willprevent employee from bring concern to higher

authority. To overcome these problems, many firms have

implemented programs that provide channels andprocedures to facilitate internal whistleblowing.


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Right to participate and

Participatory Management How democratic is an organization?

Four theories of systems of organization (Rensis Likert) :

1) exploitative authoritative

2) benevolent authoritative

3) consultative

4) participative

No conclusive research on which one is most effective.

Thus, management has obligation to use participativemanagement with the right people and in the right

organizational contexts.


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Right to Due Process vs.

Employment-at-Will Employment-at-will: unless employees are

protected by explicit contract (such as union

employees), employers may dismiss theiremployees at will.

Based on assumption that as owner of business,

employer has right to decide freely who will work

for the business, and employee freely accepts and

freely can reject the work.


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Right to Due Process versus

Employment-at-will Critique of employment-at-will:

1) employee are often not free to accept or reject

employment without suffering harm due to difficulty offinding another job.

2) employee works for a firm with understanding that firmwill treat him fairly.

3) workers have right to be treated with respect as free and

equal persons. Included here is the right to non-arbitrarytreatment and right not to be forced to suffer harm unfairlyor on basis of false accusations.


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Right to Due Process versus

Employment-at-will Right to due process refers to fairness of the process

by which decision-makers impose sanctions on

subordinates. Most critical right of employees, because without

this right, other rights may not stand to berespected.

Due process ensures individuals are not treatedarbitrarily, maliciously, capriciously by theirsuperiors in the administration of the firms rules,setting a limit to the exercise of power of superior.


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Right to Due Process

Due process most important in hearing of grievances.

Essential components of effective grievance procedure:

1. 3 to 5 steps of appeal.

2. Written account of grievance on the first level.

3. Alternate routes of appeal so employee can bypass his

superior.

4. Time limit for each step of appeal.

5. Permission for employee to have 1 or 2 co-workers to

accompany him.


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Employee Rights and Plant

Closings Moral rights of workers involved in plant closing should continue to be

respected, among them the right to be informed about impendingshutdowns.

Steps companies can take to minimize harmful effects of plant closings(William Diehl):

1. Advance notice

2. Severance pay

3. Health benefits

4. Early retirement 5. Transfer

6. Job retraining

7. Employee purchase

8. Phasing out local taxes


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ORGANIZATIONAL

POLITICS Organizational politics are the processes in which

individuals or groups within an organization use non-formally sanctioned power tactics to advance their own

aims.

Power tactics called political tactics, often covert.

Examples of political tactics: blaming or attacking others,controlling information, developing a base of support for

ones ideas, image building, ingratiation, associating withthe influential, forming power coalitions and developing

strong allies, creating obligations.


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Political Tactics

Basic source of power is the creation of

dependency.

Such dependencies can be created by getting

control over scarce resources desires by

others, and establishing favorable

relationships.


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Political Tactics

Dilemma for individual in organization is

knowing where the line that separates

morally legitimate and necessary political

tactics from those that are unethical.

Four questions to ask regarding the ethical

use of political tactics:


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Political Tactics

The utilitarian question:Are the goals one intendsto achieve by the use of the tactics socially

beneficial or socially harmful? Clearly unethical: political tactics that pursue

personal goals at the expense of organizationsproductive goals, and political tactics that

knowingly involve inefficiency and waste. Political tactics may be used to ensure installation

of morally legitimate goals as long as they meet thenext two criteria.


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Political Tactics

The rights question:Do the political tactics used asmeans to these goals treat others in a manner

consistent with their moral rights? Deception and manipulation unethical because they

fail to respect a persons right to be treated notmerely as a means but also as an end.

Not always wrong to use deceptive andmanipulative political tactics. E.g. when one knowsthat this is part of the game, and I choose to remainin the organization and I consent to play the game.


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Political Tactics

Use of deceptive or manipulative political tactics

clearly unethical when:

1) used against persons who do not know or do notexpect these tactics to be used against them

2) used against persons who are not free to leave

the organization 3) used against persons who are not skilled at

defending themselves against these tactics.


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Political Tactics

Justice question; Will the political tactics lead to anequitable distribution of burdens and benefits?

E.g. showing favoritism in administering budget orinformation system.

E.g. engineer competing with another for promotion maycultivate or flatter superiors, discredit rival, even if the otherengineer is more qualified.

Distributive justice: individuals who are similar in allrelevant respects should be treated similarly, and individualswho are dissimilar in relevant respects should be treateddissimilarly in proportion to their dissimilarity.


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Political Tactics

Caring question: What impact will the

political tactics have on the web of

relationships within the organization?

Use of power in organization tends to

routinize the dehumanized treatment of the

less powerful.


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THE CARING

ORGANIZATION Caring model: organization is a network of relationships in

which connected selves form webs of on-goingrelationships with other connected selves.

Caring organization is one in which caring is:

1) focused on persons, not quality, profits

2) undertaken as end in itself, not as means towards qualityor profit, etc.

3) essentially personal

4) growth-enhancing for the cared-for, moving them to use

and develop full capacities.


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CARING ORGANIZATION

Caring organization, it is argued, will exhibit better

economic performance than contractual and

political due to: 1) lowering costs of disciplinary action

2) develops concern for serving customer and

therefore more competitive 3) can inspire and motivate other employees to

excel.


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CARING ORGANIZATION

Key ethical issue in caring organization: potentialfor caring too much and potential for not caring

enough. 1. Moral problem of caring too much: demand for

caring for others can lead to burnout. Conflict ofcaring for others and caring for oneself. Also,

caring for others may conflict with what we mayfeel we owe to others. E.g. caring for a friend whois violating company policy and fairness towardcompany that requires such violations be reported.


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CARING ORGANIZTION

2. The moral problems of not caring enough

Individual level: fellow employee or customer in

need, and we ignore that need. Organizational level: systematic driving out caring

through indiscriminate layoffs, impersonalizedbureaucracies, managerial styles that look at

employees as disposable costs, or through rewardsystems that discourage caring and rewardcompetitiveness.


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Work is love made visible

Kahil Gibran

END!!!


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CORPORATIONS

Are legal entities, with legal rights and

responsibilities similar but not identical to

those enjoyed by the individuals.

Business Corporations are limited liability

companies-that is, their owners or

stockholders are only liable for corporatedebts up to the extent of their investments


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Corporate Moral Agency

Corporations are entity that can have Moral

Responsibilities in making rational and moral

decisions and they can be held morally

blameworthy and praiseworthy of their actions.


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Corporate Moral Agency

Corporate Internal Decision (CID) structure

makes it reasonable to assign moral

responsibility to corporation.

Assigning moral responsibility among

individuals inside the corporation.


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Narrow View

Corporate responsibility should be construednarrowly to cover only profit maximization.

1. Diverting the corporation from the pursuit ofprofit makes our economic system less efficient.

2. Businesss only social responsibility is to makemoney out within the name of the game.

3. Private enterprise should not be forced toundertake public responsibilities that properlybelong to the government.


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Narrow View

Advocates of the narrow view stress that

management has a promissory relation with

the owners (stockholders) of a corporation,

which obligates it to focus on profit

maximization alone.


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Broader View

Corporate Responsibility broadly include refraining fromsocially undesirable behavior contributing actively anddirectly to the public good.

1. Corporations have additional responsibilities because oftheir great social and economic powers.

2. Business is governed by implicit social contract, whichrequires it to operate in ways that benefit the society

3. Corporation must take responsibility for the unintended

side effects of their business transactions (externalities)and weigh the full social costs of their activities.


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Corporate Responsibility

Should corporate responsibility be

broadened? Argument against:

1. The invisible hand argument.

2. The hand-of-government-argument.

3. The inept-custodian argument.4. The materialization-of-society argument.


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Those proposing broader corporate responsibilities see thecreation of an ethical atmosphere within the corporation asan important steps.

Essential to this atmosphere are corporateacknowledgement of the critical importance of ethics:

a. corporate encouragement of morally responsible conductby its members,

b. An end to corporate defensiveness in the face of criticism,c. Corporate recognition of the pluralistic nature of our social

system.


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Corporation and the people who make them

up must have high moral standards and

monitor their own behavior because there are

limits to what the law can do to ensure that

business behavior is socially and morally

acceptable.


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All settled economic life requires trust and

confidence. The adoption of realistic and

workable codes of ethics in the business

world can actually enhance business

efficiency. This is particularly true when

there is an imbalance of knowledge betweenbuyer and the seller.


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To improve the organizational climate so

individuals can reasonably be expected to act

ethically:

1. Adopt a corporate ethical code.

2. Set up a high-ranking ethics committee.

3. Training in their management development program.

4. Attention to corporate culture is also crucial to thesuccessful institutionalization of ethics inside anorganization.

Documents

The Individual in the Organization