Bahasan Tentang Etika Bisnis - Ferrell (1).pdf

Membahas Tentang Etika Bisnis - Ferrell (1).pdf

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Part One
An Overview of
Business Ethics
Chapter 1
The Importance of
Business Ethics

2. Ethics is a part of decision making at all
levels of work and management
As important as functional areas of business
Questions whether practices are acceptable
There are no universally accepted approaches
for resolving issues
2
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3. Comprises organizational principles, values, and
norms that may originate from individuals,
organizational statements, or from the legal
system that primarily guide individual and
group behavior in business
Ethical decisions occur when accepted rules no
longer serve and decision makers must weigh
values and reach a judgment
Values and judgments play a critical role when we
make ethical decisions
3
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4. Morals: Refer to a person’s personal
philosophies about what is right or wrong
Morals are personal and singular
Principles: Specific and pervasive boundaries
for behavior that should not be violated
Human rights, freedom of speech and justice
Values: Enduring beliefs and ideals that are
socially enforced
Teamwork, trust and integrity
4
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5. Nearly half of employees observe at least
one form of misconduct in the workplace
After the financial crisis, business decisions
and activities have come under scrutiny
The financial sector has not fully regained
stakeholder trust
5
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6. 6
Global Trust in
Industry Sectors
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Source: Edelman Global Deck: 2013 Trust Barometer, http://www.edelman.com/trust-downloads/global-results-2/
(accessed January 30, 2013).

7. Misuse of company resources
Abusive behavior
Harassment
Accounting fraud
Conflicts of interest
Defective products
Bribery
Employee theft
7
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8. Having good individual morals is not enough
to stop ethical misconduct
Ethics training helps provide collective
agreement in diverse organizations
Business ethics decisions can be complicated
Helps to identify ethical issues when they
arise and recognize the approaches available
to resolve them
8
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9. 9
Timeline of Ethical and
Socially Responsible Concerns
Source: Adapted from “Business Ethics Timeline,” Ethics Resource Center , http://www.ethics.org/resource/business-ethics-
timeline (accessed June 13, 2013). Copyright © 2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747
Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006, www.ethics.org.
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1960s 1970s 1980s 1990s 2000s
Environmental
issues
Employee
militancy
Bribes and
illegal
contracting
practices
Sweatshops and unsafe
working conditions in
third-world countries
Cybercrime
Civil rights issuesHuman rights
issues
Influence
peddling
Rising corporate
liability for personal
damages (cigarette
companies)
Financial
misconduct
Increased
employee-
employer
tension
Covering up
rather than
correcting issues
Deceptive
advertising
Financial
mismanagement
and fraud
Global issues,
Chinese product
safety
Changing
work ethic
Disadvantaged
consumers
Financial fraud
(savings and
loan scandal)
Organizational ethical
misconduct
Sustainability
Rising drug useTransparency
issues
Intellectual
property theft

10. Theological discussions of ethics emerged
Catholic social ethics were concerned with
morality in business, workers’ rights, and
living wages
The Protestant work ethic encouraged
individuals to be frugal, work hard and attain
success in the capitalistic system
These traditions provided a foundation for
the future field of business ethics
10
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11. Social consciousness emerged
Increased anti-business sentiment
JFK’s Consumer Bill of Rights—a new era of
consumerism
Right to safety, to be informed, to choose,and to
be heard
Consumer protection groups fought for
legislation changes
Ralph Nader
11
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12. Corporate social responsibility-an
organization’s obligation to maximize positive
impact and minimize negative impact on
stakeholders
Philosophers increased their involvement
Businesses concerned with public image
Conferences held and centers developed
Issues:
Bribery Deceptive advertising
Price collusion Product safety
Environment
12
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13. Business ethics became an acknowledged
field of study and firms established ethics
committees
Ethics centers provided publications,
courses, conferences, and seminars
Defense Industry Initiative on Business
Ethics and Conduct (DII)
Foundation for the Federal Sentencing Guidelines
for Organizations to come in the 1990’s
President Reagan introduced self-regulation
that changed the rules of business
13
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14. Continued support for self-regulation and
free trade
Health-related issues more regulated
The Federal Sentencing Guidelines for
Organizations (FSGO) in 1991
Set tone for compliance
Preventative actions against misconduct
A company could avoid/minimize potential
penalties
14
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15. Continued corporate non-compliance
Increased public/political demand for improved
ethical standards
Sarbanes-Oxley Act (2002)
Increased accounting regulations
FSGO reforms
Requires governing authorities to be informed of
business ethics programs
Dodd-Frank Wall Street Reform and Consumer
Protection Act (2010)
Aimed at making the financial industry more
transparent/responsible
15
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16. Ethical culture: acceptable behavior as
defined by the company and industry
Creates shared values and support for ethical
decisions –driven by top management
Goal:
Minimize need for enforced compliance
Maximize utilization of principles/ethical
reasoning in difficult or new situations
16
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17. Collaborative efforts to establish goals and
set minimum levels of ethical behavior
European Union
NAFTA
MERCOSUR
WTO
Companies can demonstrate their
commitment to social responsibility through
adopting international standards like the
United Nations Global Compact
17
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18. 18
Role of Organizational
Ethics in Performance
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© Cengage Learning 2015

19. Commitment comes from employees who are
invested in the organization and willing to make
personal sacrifices for the organization
The more company dedication to ethics, the
greater the employee dedication
Concerns include a safe work environment,
competitive salaries and benefits packages, and
fulfillment of contractual obligations
19
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20. Investors are increasingly interested in a
company’s reputation and recognize how:
ethical culture provides a foundation for
efficiency, productivity, and profitability
negative publicity, lawsuits, and fines threaten a
company’s long-term viability
Gaining investors’ trust and confidence is
vital to sustaining financial stability
20
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21. Customer satisfaction is an important factor
in a successful business strategy
Companies seen to be socially responsible increase
customer trust and satisfaction
Trust is essential for long-term customer
relationships
A strong organizational ethical climate places
customers’ interests first
Ethical conduct toward customers builds a
strong competitive position shown to
positively affect performance and innovation
21
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22. Companies need profits in order to meet
their responsibilities
Corporate concern for ethical conduct is
being integrated with strategic planning
Maximizing profitability
Ethics has moved from being a compliance
standard to becoming an integral part of
achieving a competitive advantage
22
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23. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
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Part One
An Overview of
Business Ethics
Chapter 2
Stakeholder
Relationships, Social
Responsibility and
Corporate
Governance

24. 24
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Building effective relationships is one of the most
important areas of business today
Business ethics is a team sport and few decisions
are made byonly one individual
Stakeholder framework
Helps identify internal and external stakeholders
Helps monitor and respond to needs, values, and
expectations of stakeholder groups
Corporate governance
The formal system of accountability and control
of ethical and socially responsible behavior

25. 25
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Stakeholders:Those who have a stake or claim
in some aspect of a company’s products,
operations, markets, industry, and outcomes
Customers Investors
Employees Suppliers
Government agencies Communities
The relationship between companies and
their stakeholders is a two-way street

26. Three approaches to stakeholder theory
Normative
Principles and values help identify ethical
guidelines that dictate how to treat stakeholders
Descriptive
Focuses on actual behavior, addressing decisions
and strategies in stakeholder relationships
Instrumental
Examines stakeholder relationships and describes
outcomes for particular behaviors
26
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27. 27
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Primary stakeholders: those whose continued
association is absolutely necessary for a firm’s
survival
Employees, customers, investors, governments, and
communities
Secondary stakeholders: do not typically
engage in transactions with the firm and are not
essential to a firm’s survival
Media, trade associations, and special interest
groups

28. 28
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Source: Adapted from Isabelle Maignan, O. C. Ferrell, and Linda Ferrell, “A Stakeholder Model for Implementing Social
Responsibility in Marketing.” European Journal of Marketing 39 (2005): 956–977. Used with permission.

29. 29
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The degree to which a firm understands
and addresses stakeholder demands
Involves activities that facilitate and
maintain value with stakeholders
Generation of data about stakeholder groups
Distribution of that information
Responsiveness of the organization as a whole

30. 30
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An organization’s obligation to maximize its
positive impact on stakeholders and minimize
its negative impact
Four levels of social responsibility
Economic
Legal
Ethical
Philanthropic

31. 31
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Source: Adapted from Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of
Organizational Stakeholders,” Business Horizons (July–August 1991): 42, Fig. 3.

32. 32
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The extent to which businesses
strategically meet their economic, legal,
ethical, and philanthropic responsibilities
Four interrelated dimensions
Strong sustained economic performance
Rigorous compliance
Ethical actions beyond what is legally required
Voluntary contributions to advance reputation
and stakeholder commitment

33. 33
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L’ORÉAL Petco
Xerox KelloggCompany
OfficeMax Starbucks
Cummins, Inc. Target
Ford Motor CompanySalesforce.com, Inc.
General Electric T-Mobile USA
PepsiCo Hasbro
Whole Foods MarketMicrosoft Corporation
Aflac ARAMARK
Source:Ethisphere Institute, “2013 World’s Most Ethical Companies,” Ethisphere,
http://m1.ethisphere.com/wme2013/index.html (accessed March 7, 2013).

34. 34
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Reputation is one of an organization’s
greatest intangible assets with tangible
value
Difficult to quantify but very important
A single negative incident can influence
an organization’s image and reputation
instantly and for years afterwards

35. 35
Social Responsibility
Issues
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Social
Deals with concerns that affect the welfare of our
entire society, associated with the common good
Consumer Protection
The company has the responsibility of taking
precautions to prevent consumer harm
Sustainability
Businesses can no longer afford to ignore the natural
environment as a stakeholder
Corporate Governance
Research shows corporate governance has a strong
positive relationship with social responsibility

36. 36
Social Responsibility and
Stakeholder Orientation
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Caring about stakeholders can lead to
increased profits
The purpose of a stakeholder orientation is to
maximize positive outcomes that meet
stakeholder’s needs
Stakeholders support companies they
perceive to be socially responsible, enhancing
profitability

37. 37
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Source: CR’s 100 Best Corporate Citizens 2012 , http://www.thecro.com/files/100Best2012_List_3.8.pdf
(accessed February 14, 2013).
1. Bristol-Myers Squibb
2. International Business Machines Corp.
3. Intel Corp.
4. Microsoft Corporation
5. Johnson Controls Inc.
6. Accenture plc
7. Spectra Energy Corp.
8. Campbell Soup Co.
9. Nike, Inc.
10. Freeport-McMoranCopper & Gold Inc.

38. 38
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Formal systems of accountability,
oversight, and control
Accountability
How closely workplace decisions align with a
firm’s strategic direction
Oversight
A system of checks and balances to minimize
opportunities for misconduct
Control
The process of auditing and improving
organizational decisions and actions

39. 39
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Source: “Corporate Alert: Top 10 Topics for Directors in 2011,” December 6, 2010,
http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/USEng/Documen
ts/Board%20Governance/Top%2010%20Topics%20for%20Directors%20in%202011_Akin_120610.pdf (accessed February 15, 2011).
Executive Compensation
Enterprise-Wide Risk Management
Short-and Long-Term Strategies
Board Composition and Structure
Shareholder Relations
CEO Selection, Termination, and Succession Plans
Role of the CEO in Board Decisions
Auditing, Control, and Integrity of Financial Reporting
Compliance with Government Regulation and Reform
Organizational Ethics Programs

40. 40
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40 % of boards split the CEO and Chair functions
Boards are getting smaller, with an average of 11 members
( 5 : 1 ratio independent: non-independent)
74 % of boards have mandatory retirement rules for directors
Almost all boards conduct annual board performance evaluations
71 % limit the time that board members can serve on outside boards
21 % of new directors are women, although 10 % of boards have no women directors
Over 50 % of CEOs in the S&P 500 do not serve on outside boards
Important characteristics in directors: strong financial background,
industry background, and international experience
Average board member retainer: $ 20,00 in 1986 ($ 40,000 in today’s dollars) and $
80,000 in 2010
Average total director compensation has risen to $ 215,000 in 2010
Source: Julie HembrockDaum, “How Corporate Governance Changed from 1986–2010,” Business Week ,
http://www.businessweek.com/managing/content/nov2010/ca2010118_316346.htm (accessed April 2, 2013).

41. 41
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Shareholder model
Founded in classic economic precepts
Maximizing wealth for investors and owners
Stakeholder model
A broader view of the purpose of business
Includes satisfying concerns of primary
stakeholders including employees, suppliers,
regulators, communities and special interest
groups

42. 42
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Holds final responsibility for its firm’s
success, failure, and ethicality of actions
The global financial crisis motivated many to
demand greater accountability from boards
In reality, boards rarely manage but instead
monitor executive decisions
Executive compensation is a growing ethical
concern

43. 43
Demands for Accountability
and Transparency
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Stakeholders demand that boards are
accountable and transparent
Directors offer expertise, competence, and
diverse perspectives to strategic decisions
Qualified, knowledgeable, diverse, unbiased
boards can prevent misconduct
Interlocking directorate is the concept of
board members being linked to more than
one company

44. 44
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Many boards spend more time discussing
compensation than ensuring integrity of
financial reporting systems
How closely linked is executive compensation
to company performance?
Does performance-linked compensation
encourage executives to focus on short-term
performance at the expense of long-term
growth?

45. 45
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1.Assessing the corporate culture
2.Identifying stakeholder groups
3.Identifying stakeholder issues
4.Assessing organizational commitment to
social responsibility
5.Identifying resources and determining
urgency
6.Gaining stakeholder feedback

46. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
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Chapter 3
Emerging Business
Ethics Issues
Part Two
Ethical Issues
and the
Institutionalization
of Business Ethics

47. An ethical issue is a problem, situation,
or opportunity that requires an individual
or group to choose among actions
New ethical issues are emerging constantly
Can be difficult to recognize ethical issues
Failure to do so puts corporations at risk
Is a problem in industries where winning is
perceived to be a game
47
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48. 48
Specific Types of
Observed Misconduct
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Source: Ethics Resource Center, 2011 National Business Ethics Survey: Workplace Ethics in Transition (Arlington, VA: Ethics Resource Center, 2012), 39.
Behavior 2011 (%)2009 (%)
Misuse of company time 33 n/a
Abusive behavior 21 22
Lying to employees 20 19
Company resource abuse 20 23
Violating company Internet use policies16 n/a
Discrimination 15 14
Conflicts of interest 15 16
Inappropriate social networking 14 n/a
Health or safety violations 13 11
Lying to outside stakeholders 12 12
Stealing 12 9
Falsifying time reports or hours worked12 n/a
Employee benefit violations 12 11
Sexual harassment 11 7

49. Integrity: Uncompromising adherence to
ethical values
One of the most important terms relating to virtue
49
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50. Honesty: Truthfulness or trustworthiness
Telling the truth to the best of your knowledge
Dishonesty: A lack of integrity, incomplete
disclosure, or an unwillingness to tell the truth
Issues related to honesty arise when people
perceive business as something where normal
rules do not apply
50
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51. Fairness: The quality of being just, equitable,
and impartial
Equality: How wealth or income is distributed
Reciprocity: Occurs when an action that has an
effect upon another is returned
Optimization: The tradeoff between equity and
efficiency
51
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52. An ethical dilemma is a problem, situation, or
opportunity that requires an individual or group
to chose among several wrong or unethical
actions
There is no ethical choice
52
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53. 53
Shareholder
Issues
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1.Core values
2. Shareholder participation in electing directors
3. Executive compensation
4. Legalcompliance
5. Lobbying and political activities
6. Reputation management
7. Integrity in collecting and managing data
8. Supply chain relationships and human rights

54. The leading form of observed misconduct
Can range from unauthorized use of
equipment and computers to embezzling
company funds
Time theft costs organizations hundreds of
billions in lost productivity annually
54
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

55. One of the most common ethical problems
Can be physical threats, false accusations,
profanity, insults, harshness, ignoring
someone, or unreasonableness
Intent is important in determining abuse
Bullyingis a growing problem
Is associated with a hostile workplace
55
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

56. 56
Actions Associated
with Bullies
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1.Spreading rumors to damage others
2. Blocking others’ communication in the workplace
3. Flaunting status or authority to take advantage of others
4. Discrediting others’ ideas and opinions
5. Use of e-mails to demean others
6. Failing to communicate or return communication
7. Insults, yelling, and shouting
8. Using terminology to discriminate by gender, race, or age
9. Using eye or body language to hurt others or their reputations
10. Taking credit for others’ work or ideas
Source: Adapted from Cathi McMahan, “Are You a Bully?” Inside Seven , California Department of Transportation
Newsletter, June 1999, 6.

57. Three types of lies
Joking without malice
Commission lying is creating a false
perception with words that deceive the
receiver
Creating noise
Omission lying is intentionally not
informing channel members of problems
relating to a product that affects awareness,
intention, or behavior
57
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

58. Exist when an individual must choose
whether to advance his/her personal
interests, those of the organization, or
some other group
Individuals must separate personal interests
from business dealings
58
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

59. The practice of offering something in
order to gain an illicit advantage
Different types of bribery
Active bribery: The person who promises or
gives the bribe commits the offense
Passive bribery: An offense committed by the
official who receives the bribe
Facilitation payments: Legal as long as
they are small
59
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

60. The collection and analysis of information
on…
Markets
Technologies
Customers and competitors
Socioeconomic and external political trends
60
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

61. Three intelligence models
Passive monitoring system for early warning
Tactical field support
Support dedicated to top management
strategy
61
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

62. Hacking
System hacking
Remote hacking
Physical hacking
Social engineering
Shoulder surfing
Password guessing
Dumpster diving
Whacking
Phone eavesdropping
62
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

63. Is illegal in the U.S.
A company can be sued for discrimination if
it…
Refuses to hire an individual for discriminatory
reasons
Unreasonably excludes an individual from
employment
Unreasonably discharges an individual
Discriminates against an individual with respect
to hiring, employment terms, promotion, or
privileges
63
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

64. Equal Employment Opportunity
Commission (EEOC)
The Age Discrimination in Employment Act
Affirmative Action Programs
Efforts to recruit, hire, train, and promote
qualified individuals from groups that have
traditionally been discriminated against
64
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

65. A repeated, unwanted behavior of a sexual
nature perpetrated upon an individual by
another
Hostile work environment
The conduct was unwelcome
The conduct was severe, pervasive, and regarded
by claimant as hostile/offensive
The conduct was such that a reasonable person
would find it hostile or offensive
65
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

66. A personal, loving, and/or sexual
relationship with someone with whom
you share professional responsibilities
A key ethical issue in sexual harassment
Unethical dual relationship: The
relationship causes a conflict of interest or
impairment of professional judgment
66
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

67. 1.Statement of policy
2.Definition of sexual harassment
3.Non-retaliation policy
4.Specific procedures for prevention
5.Establish, enforce, and encourage victims to
report
6.Establish a reporting procedure
7.Timely reporting requirements to the proper
authorities
67
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

68. Any purposeful communication that
deceives, manipulates, or conceals facts in
order to create a false impression
Accounting fraud
Misrepresentation of company’s financial reports
Dramatic changes in accounting field
Increased competition and pressures to perform
can create opportunities for misconduct
Accountants should abide by a strict code of ethics
68
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

69. 69
Initial Detection of
Operational Frauds
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Association of Certified Fraud Examiners, Report to the Nations on Occupational Fraud and Abuse: 2012 Global
Fraud Study , 14.

70. The process of dishonestly creating,
distributing, promoting, and pricing
products
Puffery: Exaggerated advertising claims,
blustering, and boasting
Can be difficult to distinguish from fraud
Implied falsity: An advertising message that
misleads, confuses, or deceives the public
Literally false: Claims can be divided into tests
prove (establishment claims) and bald assertions
(non-establishment claims)
70
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

71. When consumers attempt to deceive
businesses for personal gain
Price tag switching, item switching, or lying to
obtain discounts
Collusioninvolves an employee who helps a
consumer commit fraud
Duplicityinvolves a consumer duping a
store
Guileis associated with a person who uses
tricks to obtain an unfair advantage
71
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

72. The failure to understand and manage ethical
risks was a key problem in the recent
financial crisis
Many firms rewarded risk-taking
Difficult-to-understand financial instruments and
murky accounting played roles
Government calls for reform
Stricter controls on hedge funds and other
instruments
Greater transparency
Dodd-Frank Wall Street Reform and Consumer
Protection Act
72
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

73. Two types of insider trading
Legal insider trading: Involves legally buying
and selling stock in an insider’s own company, but
not all the time
Illegal insider trading: The buying or selling of
stocks by insiders who possess material that is not
public
73
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

74. Involve the legal protection of intellectual
properties
Books, movies, software
Many privacy issues in the business world
Employee use of technology
Consumer privacy
Can be challenging for businesses today to meet
the needs of consumers while protecting privacy
Identity theft is a growing problem
74
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

75. Most ethical issues become visible through
stakeholder concerns
Determining ethical issues is a challenge
Changing societal standards over time
The ethical decision making process starts
when ethical issue awareness occurs and a
discussion begins
75
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

76. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 76
Chapter 3
Emerging Business
Ethics Issues
Part Two
Ethical Issues
and the
Institutionalization
of Business Ethics

77. An ethical issue is a problem, situation,
or opportunity that requires an individual
or group to choose among actions
New ethical issues are emerging constantly
Can be difficult to recognize ethical issues
Failure to do so puts corporations at risk
Is a problem in industries where winning is
perceived to be a game
77
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

78. 78
Specific Types of
Observed Misconduct
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Ethics Resource Center, 2011 National Business Ethics Survey: Workplace Ethics in Transition (Arlington, VA: Ethics Resource Center, 2012), 39.
Behavior 2011 (%)2009 (%)
Misuse of company time 33 n/a
Abusive behavior 21 22
Lying to employees 20 19
Company resource abuse 20 23
Violating company Internet use policies16 n/a
Discrimination 15 14
Conflicts of interest 15 16
Inappropriate social networking 14 n/a
Health or safety violations 13 11
Lying to outside stakeholders 12 12
Stealing 12 9
Falsifying time reports or hours worked12 n/a
Employee benefit violations 12 11
Sexual harassment 11 7

79. Integrity: Uncompromising adherence to
ethical values
One of the most important terms relating to virtue
79
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

80. Honesty: Truthfulness or trustworthiness
Telling the truth to the best of your knowledge
Dishonesty: A lack of integrity, incomplete
disclosure, or an unwillingness to tell the truth
Issues related to honesty arise when people
perceive business as something where normal
rules do not apply
80
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

81. Fairness: The quality of being just, equitable,
and impartial
Equality: How wealth or income is distributed
Reciprocity: Occurs when an action that has an
effect upon another is returned
Optimization: The tradeoff between equity and
efficiency
81
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

82. An ethical dilemma is a problem, situation, or
opportunity that requires an individual or group
to chose among several wrong or unethical
actions
There is no ethical choice
82
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

83. 83
Shareholder
Issues
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1.Core values
2. Shareholder participation in electing directors
3. Executive compensation
4. Legalcompliance
5. Lobbying and political activities
6. Reputation management
7. Integrity in collecting and managing data
8. Supply chain relationships and human rights

84. The leading form of observed misconduct
Can range from unauthorized use of
equipment and computers to embezzling
company funds
Time theft costs organizations hundreds of
billions in lost productivity annually
84
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

85. One of the most common ethical problems
Can be physical threats, false accusations,
profanity, insults, harshness, ignoring
someone, or unreasonableness
Intent is important in determining abuse
Bullyingis a growing problem
Is associated with a hostile workplace
85
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

86. 86
Actions Associated
with Bullies
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1.Spreading rumors to damage others
2. Blocking others’ communication in the workplace
3. Flaunting status or authority to take advantage of others
4. Discrediting others’ ideas and opinions
5. Use of e-mails to demean others
6. Failing to communicate or return communication
7. Insults, yelling, and shouting
8. Using terminology to discriminate by gender, race, or age
9. Using eye or body language to hurt others or their reputations
10. Taking credit for others’ work or ideas
Source: Adapted from Cathi McMahan, “Are You a Bully?” Inside Seven , California Department of Transportation
Newsletter, June 1999, 6.

87. Three types of lies
Joking without malice
Commission lying is creating a false
perception with words that deceive the
receiver
Creating noise
Omission lying is intentionally not
informing channel members of problems
relating to a product that affects awareness,
intention, or behavior
87
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

88. Exist when an individual must choose
whether to advance his/her personal
interests, those of the organization, or
some other group
Individuals must separate personal interests
from business dealings
88
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

89. The practice of offering something in
order to gain an illicit advantage
Different types of bribery
Active bribery: The person who promises or
gives the bribe commits the offense
Passive bribery: An offense committed by the
official who receives the bribe
Facilitation payments: Legal as long as
they are small
89
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

90. The collection and analysis of information
on…
Markets
Technologies
Customers and competitors
Socioeconomic and external political trends
90
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

91. Three intelligence models
Passive monitoring system for early warning
Tactical field support
Support dedicated to top management
strategy
91
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

92. Hacking
System hacking
Remote hacking
Physical hacking
Social engineering
Shoulder surfing
Password guessing
Dumpster diving
Whacking
Phone eavesdropping
92
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

93. Is illegal in the U.S.
A company can be sued for discrimination if
it…
Refuses to hire an individual for discriminatory
reasons
Unreasonably excludes an individual from
employment
Unreasonably discharges an individual
Discriminates against an individual with respect
to hiring, employment terms, promotion, or
privileges
93
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

94. Equal Employment Opportunity
Commission (EEOC)
The Age Discrimination in Employment Act
Affirmative Action Programs
Efforts to recruit, hire, train, and promote
qualified individuals from groups that have
traditionally been discriminated against
94
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

95. A repeated, unwanted behavior of a sexual
nature perpetrated upon an individual by
another
Hostile work environment
The conduct was unwelcome
The conduct was severe, pervasive, and regarded
by claimant as hostile/offensive
The conduct was such that a reasonable person
would find it hostile or offensive
95
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

96. A personal, loving, and/or sexual
relationship with someone with whom
you share professional responsibilities
A key ethical issue in sexual harassment
Unethical dual relationship: The
relationship causes a conflict of interest or
impairment of professional judgment
96
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

97. 1.Statement of policy
2.Definition of sexual harassment
3.Non-retaliation policy
4.Specific procedures for prevention
5.Establish, enforce, and encourage victims to
report
6.Establish a reporting procedure
7.Timely reporting requirements to the proper
authorities
97
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

98. Any purposeful communication that
deceives, manipulates, or conceals facts in
order to create a false impression
Accounting fraud
Misrepresentation of company’s financial reports
Dramatic changes in accounting field
Increased competition and pressures to perform
can create opportunities for misconduct
Accountants should abide by a strict code of ethics
98
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

99. 99
Initial Detection of
Operational Frauds
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Association of Certified Fraud Examiners, Report to the Nations on Occupational Fraud and Abuse: 2012 Global
Fraud Study , 14.

100. The process of dishonestly creating,
distributing, promoting, and pricing
products
Puffery: Exaggerated advertising claims,
blustering, and boasting
Can be difficult to distinguish from fraud
Implied falsity: An advertising message that
misleads, confuses, or deceives the public
Literally false: Claims can be divided into tests
prove (establishment claims) and bald assertions
(non-establishment claims)
100
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

101. When consumers attempt to deceive
businesses for personal gain
Price tag switching, item switching, or lying to
obtain discounts
Collusioninvolves an employee who helps a
consumer commit fraud
Duplicityinvolves a consumer duping a
store
Guileis associated with a person who uses
tricks to obtain an unfair advantage
101
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

102. The failure to understand and manage ethical
risks was a key problem in the recent
financial crisis
Many firms rewarded risk-taking
Difficult-to-understand financial instruments and
murky accounting played roles
Government calls for reform
Stricter controls on hedge funds and other
instruments
Greater transparency
Dodd-Frank Wall Street Reform and Consumer
Protection Act
102
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

103. Two types of insider trading
Legal insider trading: Involves legally buying
and selling stock in an insider’s own company, but
not all the time
Illegal insider trading: The buying or selling of
stocks by insiders who possess material that is not
public
103
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

104. Involve the legal protection of intellectual
properties
Books, movies, software
Many privacy issues in the business world
Employee use of technology
Consumer privacy
Can be challenging for businesses today to meet
the needs of consumers while protecting privacy
Identity theft is a growing problem
104
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

105. Most ethical issues become visible through
stakeholder concerns
Determining ethical issues is a challenge
Changing societal standards over time
The ethical decision making process starts
when ethical issue awareness occurs and a
discussion begins
105
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

106. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 106
Chapter 5
Ethical Decision
Making
Part Three
The Decision
Making Process

107. In business, people make decisions
differently than at home
Organizational pressures have a strong influence
The ethical decision making process includes
Ethical issue intensity
Individual factors
Organizational factors
The framework for ethical decision making
does not describe how to make ethical
decisions
Outlines the factors and processes related to
ethical decision making
107
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

108. 108
Framework for Understanding Ethical
Decision Making in Business
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

109. The perceived relevance or importance of
an ethical issue to the individual, work
group, and/or organization
Reflects the ethical sensitivity of the
individual and/or work group
Triggers the ethical decision making process
109
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

110. Individuals are subject to six spheres of
influence…
Workplace Legal system
Family Community
Religion Profession
Moral intensity: Relates to a person’s
perception of social pressure and the harm
his/her decision will have on others
110
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

111. People base their ethical decisions on their
own values and principles of right or wrong
Values are learned through socialization
Good personal values decrease unethical behavior
and increase positive work behavior
Values are subjective; vary across cultures
111
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

112. An organization may intend to do right, but
organizational or social forces can alter this
intent
Research shows that various factors influence
ethical behavior
Gender—women are more ethical than men
Education, work experience, nationality, and age
affect ethical decision making
112
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113. Relates to individual differences in
relation to a general belief about how one
is affected by internal versus external
events or reinforcements
113
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114. Managers with…
External locus of control go with the flow
because that’s all they can do
Internal locus of control believe they can
control events; are masters of their destinies and
trust in their capacity to influence their
environment
Unclear relationship between locus of
control and ethical decision making
114
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

115. Organizational culture has a stronger
influence on employees than individual
values
Corporate culture: A set of values, norms,
and artifacts that members of an
organization share
Ethical culture: Reflects whether the firm has an
ethical conscience; is a function of many factors
115
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

116. Significant others: Those who have
influence in a work group
Obedience to authority: Helps to explain
why many employees unquestioningly follow
superior’s orders
116
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

117. The conditions in an organization that
limit/permit ethical/unethical behavior
Immediate job context: Where employees
work, with whom they work, and the nature
of the work
117
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

118. Opportunities for misconduct can be
reduced by establishing formal codes,
policies, and rules
Aggressive enforcement is required
Knowledge can sometimes lead to unethical
behavior
A person who has an information base, expertise,
or information about competition has an
opportunityto exploit knowledge
118
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119. 119
Most Common Office Supplies
Stolen by Employees
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “Top Office Supplies that Are
Stolen and the Average Value of Contents
In A Woman’s Purse!”
KMLE, May 16, 2012,
http://kmle1079.cbslocal.com/2012/05/16/to
p-office-supplies-that-are-stolen/
(accessed April 12, 2013).
1.Post-It notes
2. Tape
3. Scissors
4. Toilet paper
5. Copier paper
6. USB memory sticks
7. Notepads
8. Pens
9. Staplers
10. Highlighters

120. Ethical dilemmas involve situations where
rules are vague or in conflict
Critical thinking skills and ability to take
responsibility are important
The final step is deciding what action to take
based on a person’s intentions
Guilt or uneasiness is the first sign that an
unethical decision has occurred
Most businesspeople will make ethical
mistakes
120
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121. Impossible to objectively determine if a
business decision is right or wrong
Understanding how ethical decisions are
made will not solve ethical problems
Business ethics involves value judgments and
collective agreement about acceptable patterns of
behavior
Ethical decision making in business does not
rely on personal values and morals
Organizations take on cultures of their own
Informal relationships enforce an ethical culture
121
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122. Normative approaches: How
organizational decision makers should
approach an issue
Different from a descriptive approach that
examines howorganizational decision makers
approach ethical decision making
Concepts like fairness and justice are highly
important in a normative structure
122
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

123. Most organizations develop a set of core
values to provide enduring beliefs about
appropriate conduct
Core values are central to an organization and
provide direction for action
By incorporating stakeholder objectives into
corporate core values, companies begin to
view stakeholders as significant
123
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

124. Institutions are important in establishing a
foundation for normative values
Organizations face certain normative
pressures from different institutions to act a
certain way
Internally and/or externally
Sort institutions into three categories: Political,
economic, and social
124
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125. Political influences can take place within the
organization
An ethical organization has policies and rules
in place to determine appropriate behavior
Often the compliance component of the
firm’s organizational culture
Failure to abide by these rules results in
disciplinary action
125
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

126. Normative business ethics takes into account
the political realities outside the legal realm
in the form of industry standards
Legal issues such as price fixing, antitrust
issues, and consumer protection are
important in maintaining a fair and equitable
marketplace
These issues must be major considerations for
business when making ethical decisions
126
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127. Competition affects how a company operates
as well as the risks employees take for the
good of the firm
Amount of competition in an industry can be
determined/described according to…
Barriers to entry into the industry
Available substitutes for the products produced by
the industry rivals
Power of the industry rivals over their customers
Power of the industry rivals’ suppliers over the
industry rivals
127
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128. Social institutions include religion,
education, and individuals such as the family
unit
There are laws meant to ensure an
organization acts fairly, but there are no laws
saying people should do to others as they
would prefer to have done to them
Many cultures adopt this rule that has been
institutionalized into businesses with standards
on competing fairly, being transparent with
consumers, and treating employees with respect
128
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129. Industry shared values promote
organizational effectiveness when linked to
goals
Can also hinder effectiveness if more efficient
means of organization and structure are avoided
in exchange for stability
Risk that organizations might sacrifice new ideas
or methodologies in order to be more acceptable
Can limit innovativeness and productivity
Important that organization does not stray
too far from industry norms and values
129
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130. When values from political, economic, and
social institutions are embedded into the
organizational culture to provide incentives
for appropriate behavior, firms tend to act
more socially responsible
If incentives do not align with institutional
normative values or if they contradict these
values, then misconduct is likely
130
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131. John Rawls was one of the most influential
philosophers in his research on how
principles support the concept of justice
Veil of ignorance: A thought experiment that
examined how individuals would formulate
principles if they did not know what their
future position in society would be
Identified principles that were not biased by one’s
social position
131
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

132. Two main principles of justice…
Liberty principle (equality principle): States that
each person has basic rights that are compatible
to the basic liberties of others
Difference principle: States that economic and
social equalities (or inequalities) should be
arranged to provide the most benefit to the least-
advantaged members of society
Does not advocate for the complete elimination of
inequalities in society
The most ethical decision seeks to benefit and not harm
disadvantaged populations
132
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133. Companies take basic principles and
translate them into core values
Core values provide the abstract ideals that
are distinct from individual values and daily
operational procedures
Value practices evolve and are translated into
normative definitions of ethical or unethical
Individual and organizational values can
differ significantly because of ethical
diversity among individuals
133
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134. Leaders, stakeholders, and the organizational
culture impact the development of core
values
A firm’s core values provide a blueprint into
the firm’s purpose as well as how it views
ethical decision making and prioritizes
stakeholders
Organizations that have ethics programs
based on a values orientation are found to
make a greater contribution than those based
simply on compliance
134
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135. 135
Principles and
Values
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136. 136
Core Values of
Marriott
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1.Put People First
2. PursueExcellence
3. Embrace Change
4. Act with Integrity
5. Serve Our World
Source: Marriott, 2011 Annual Report, http://investor.shareholder
.com/mar/marriottAR11/index.html (accessed April 19, 2013).

137. Ethical issue intensity, individual factors,
and opportunity result in business ethics
evaluations and decisions
An organizational ethical culture is shaped
by effective leadership
Top level support is required for ethical behavior
An ethical corporate culture needs shared
values and proper oversight
The more you know about ethical decision
making, the more likely you will be to make
good decisions
137
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138. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 138
Part Three
The Decision-
Making
Process
Chapter 6:
Individual Factors:
Moral Philosophies
and Values

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The specific principles or values people
use to decide right from wrong
Person-specific
Guidelines for determining how to settle
conflicts and optimize mutual benefit
Provide direction in formulating strategies
and resolving ethical issues
No single moral philosophy is accepted by
everyone

140. 140
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Adam Smith
The father of free market capitalism
Developed the idea of the invisible hand
Milton Friedman
Markets reward or punish for unethical conduct
without the need for government regulation
Currently the dominant form of capitalism
The U.S. is exporting the idea of free
market capitalism to other countries
Free markets may not solve all problems

141. 141
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Economic systems allocate resources/products
Influenced by, and directly influence
Individual’s actions and beliefs (morals)
Society (laws) as a whole
Depend on individuals coming together and
sharing philosophies
Creates values, trust and expectations, allowing the
system to work

142. 142
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Economic value orientation: Values that
can be quantified by monetary means
If an act produces value, accept it as ethical
Idealism: Places special value on ideas and
ideals as products of the mind
Positive correlation to ethical decision-making
Realism: The view that an external world
exists independent of our perceptions
Everyone is guided by self-interest
Negative correlation to ethical decision-making

143. 143
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Monistsbelieve that only one thing is
intrinsically good
Hedonism: Pleasure is the ultimate good
Qualitative hedonism
Quantitative hedonism
Pluralistsbelieve that no onething is
intrinsically good
Instrumentalistsreject the ideas that
Ends can be separated from the means
Ends, purposes, or outcomes are intrinsically good
in and of themselves

144. 144
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Goodness theories: Focus on the end result
of actions and the goodness or happiness
created by them
Obligation theories: Emphasize the means
and motivesby which actions are justified
Divided into two categories
Teleology
Deontology

145. 145
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Considers acts as morally right or
acceptable if they produce a desired result
Pleasure, knowledge, career growth, realization of
self interest, utility, wealth or even fame
Theological philosophies assess the moral
worth of a behavior by looking at the
consequences, so these theories are often
referred to as Consequentialism

146. 146
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Two important teleological philosophies are
egoism and utilitarianism
Egoismdefines right or acceptable behavior
in terms of consequences to the individual
Maximizes personal interests
Enlightened egoists: Take a long-term
perspective and allow for the well-being of
others though their own self-interests remain
paramount

147. 147
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Utilitarianismseeks the greatest good
for the greatest number of people
Rule utilitarians: Determine behavior
based on principles designed to promote the
greatest utility
Act utilitarians: Examine a specific action
itself; not the rules governing it

148. 148
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Moral philosophies focusing on the rights
of individuals and on the intentions
associated with a particular behavior
Believe individuals have certain absolute rights
Believe compliance with stable moral principles
defines ethicalness
Sometimes referred to as nonconsequentialism,
a system of ethics based on respect for persons

149. 149
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Contemporary deontology
Categorical Imperative –Immanuel Kant
Ethical acts can be viewed by everyone and the
rationale behind the act is suitable as a universal
principle
Rule deontologists: Conformity to general
moral principles determines ethicalness
Act deontologists: Actions are the proper
basis on which to judge morality

150. 150
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Individuals and groups derive definitions
of ethical behavior subjectively from
experience
Descriptive relativism: Relates to
observations of other cultures
Metaethical relativism: Proposes people
see situations from their own perspectives
No objective way of resolving ethical disputes
between different value systems and individuals
Normative relativism: Assumes one
person’s opinion is as good as another’s

151. 151
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Ethical behavior follows conventional
moral standards and compares behavior
against a standard “good” moral character
Can be summarized as
Good corporate ethics programs encourage
individual virtue and integrity
The virtues associated with appropriate conduct
form a good person
The ultimate purpose is to serve the public good
The well-being of the community goes together
with individual excellence

152. 152
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Fair treatment and due reward in
accordance with ethical or legal standards
Distributive justice: An evaluation of the
results of a business relationship
Procedural justice: Considers the processes
and activities that produce desired outcomes
Interactional justice: Based on relationships
between organizational members, including
employees and managers

153. 153
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Individuals use different moral
philosophies for personal decisions than
they use for work-related decisions
Two things may explain this behavior
Pressures for workplace success differ from the
goals and pressures in outside life
Morale character may change to become
compatible with the work environment
Moral philosophies must be assessed on
a continuum

154. 154
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Consists of six stages
1.Punishment and obedience
2.Individual instrumental purpose and
exchange
3.Mutual interpersonal expectations,
relationships, and conformity
4.Social system and conscience maintenance
5.Prior rights, social contract, or utility
6.Universal ethical principles

155. 155
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Reduced to three levels of ethical concern
1.Concern with immediate interests and
rewards and punishments
2.Concern with rightas expected by the larger
society or some significant reference group
3.Seeing beyond norms, laws, and the
authority of groups or individuals

156. 156
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Shows that individuals can change their values
through moral development
Supports management’s development of
employee’s moral principles
However, the three hit theory says
Kohlberg used questionable research methods
His theory contradicts basic moral philosophy
His theory, while reliable, may not be valid

157. 157
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Illegal acts committed for personal and/or
organizational gain by abusing the trust and
authority associated with a given position
White collar criminals are educated people in
positions of power and respectability
The financial sector has a high level of WCCs
WCCs are increasing steadily
Technology allows WCCs to be committed at all
levels, not just the top levels of management
Resulting in increased government efforts to
detect and punish WCCs

158. 158
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Patterns of activities become institutionalized
and may encourage unethical behaviors
Undecided employees go along with the
majority, whether ethical or unethical
WCCs increase after economic recessions
Some businesspeople may have inherently
criminal personalities, corporate psychopaths

159. 159
Top Internet
Fraud Complaints
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Source: IC 3 , Internet Complaint Center 2011 Internet Crime Report ,
http://www.ic3.gov/media/annualreport/2011_ic3report.pdf (accessed April 25, 2013).

160. 160
Common Justifications for
White Collar Crimes
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Source: Adapted from Daniel J. Curran and Claire M. Renzetti, Theories of Crime (Needham Heights, MA: Allyn& Bacon, 1994).
1. Denial of responsibility. (Everyone can, with varying degrees of
plausibility, point the finger at someone else.)
2. Denial of injury. (White-collar criminals often never meet or interact with those
who are harmed by their actions.)
3. Denial of the victim. (The offender is playing tit-for-tat and claims to be
responding to a prior offense inflicted by the supposed victim.)
4. Condemnation of the condemners. (Executives dispute the legitimacy of the laws
under which they are charged, or impugn the motives of the prosecutors who enforce
them.)
5. Appeal to a higher authority. (“I did it for my family” remains a popular excuse.)
6. Everyone else is doing it. (Because of the highly competitive marketplace, certain
pressures exist to perform that may drive people to break the law.)
7. Entitlement. (Criminals simply deny the authority of the laws they have broken.)

161. 161
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Most unethical behavior is not for personal
gain, but to meet performance goals
Rewards for performance goals and corporate
culture in general are the most important
drivers of ethical decision making
Equipping employees with skills that allow them
to understand and resolve ethical dilemmas will
help them make good decisions

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 162
Chapter 7
Organizational
Factors: The Role
of Ethical Culture
and Relationships
Part Three
The Decision
Making Process

163. Corporate culture has many definitions
A set of values, norms, and artifacts,
including ways of solving problems shared by
organizational members
The shared beliefs top mangers have about
how they should manage themselves and
other employees and how they should
conduct their business
Gives organizational members meaning and
sets the internal rules of behavior
Allorganizations have culture
163
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164. Culture is codified by the Sarbanes-
Oxley 404 compliance section
Includes assessment of effectiveness of
controls by management and external
auditors
Forces firms to adopt a set of values that
make up part of the culture
Compliance with 404 requires cultural
change, not only accounting changes
164
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165. May be formalthrough statements of values,
beliefs, and customs
Comes from upper management
Memos, codes, manuals, forms, ceremonies
May beinformal through direct or indirect
comments conveying management’s wishes
Dress codes, promotions, extracurricular activities
The “tone at the top” is critical in creating
ethical corporate culture
165
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166. 166
U.S. Bank’s Principles
For Integrity
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Being a role model for ethical behavior
Promoting our culture of integrity
Fostering open communication
Recognizing behavior that exemplifies our ethical principles and values
Responding to misconduct and reporting violations
Source: U.S. Bank, Do the Right Thing: Code of Ethics and Business Conduct ,
https://www.usbank.com/hr/docs/policies/coeHandbook.pdf (accessed
March 8, 2011).

167. Concern for people
The organization’s efforts to care for its
employees’ well-being
Concern for performance
The organization’s efforts to focus on output and
employee productivity
167
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

168. 168
Traits to Look for in
Future Leaders
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “Robert Half Management Resources Survey: CFOs Cite Integrity as Most Important Trait for Future Leaders,” PR
Newswire, September 30, http://www.prnewswire.com/news-releases/robert-half-management-resources-survey-cfos-
cite-integrity-as-most-important-trait-for-future-leaders-104072008.html (accessed April 26, 2013).

169. Apathetic: Minimal concern for people or
performance
Caring: High concern for people; minimal
concern for performance
Exacting: Minimal concern for people; high
concern for performance
Integrative: High concern for people and
performance
169
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

170. A cultural audit is an assessment of the
organization’s values
Usually conducted by outside consultants;
can be handled internally
170
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

171. 171
Company Examples of the
Four Organizational Cultures
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

172. Ethical corporate culture is a significant
factor in ethical decision making
If a firm’s culture encourages/rewards/does
not monitor unethical behavior, employees
may act unethically
Management’s sense of an organizational
culture may differ from that guiding
employees
172
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

173. Compliance-based cultures use a legalistic
approach to ethics
Revolve around risk management, not ethics
Lack of long-term focus and integrity
Value-based cultures rely on mission
statements that define the firm and
stakeholder relations
Focus on values, not laws
Top-down integrity is critical
173
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

174. The idea that people learn
ethical/unethical behavior while
interacting with others
Studies support that differential association
supports ethical decision making
Superiors have a strong influence on
subordinates
Employees may go along with superiors’
moral judgments to show loyalty
174
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

175. Exposing an employer’s wrongdoing to
company outsiders
Some legal protections exit
The Sarbanes-Oxley Act, the FSGO, and the
Dodd-Frank Act have institutionalized
whistle-blowing protections to encourage
discovery of misconduct
Whistle-blowers fear retaliation
175
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

176. 176
Questions to Ask before Engaging in
External Whistle-Blowing
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1. Have I exhausted internal anonymous reporting opportunities within
the organization?
2. Have I examined company policies and codes that outline acceptable
behavior and violations of standards?
3. Is this a personal issue that should be resolved through other means?
4. Can I manage the stress that may result from exposing potential
wrongdoing in the organization?
5. Can I deal with the consequences of resolving an ethical or legal conflict
within the organization?

177. 177
Percentage of Employees Who Experience
Retaliation after Reporting Misconduct
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Ethics Resource Center, 2011 National Business Ethics Survey: Workplace Ethics in Transition (Arlington, VA: Ethics
Resource Center, 2012), 15.

178. 178
How Employees Report
Observed Misconduct
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Ethics Resource
Center, 2011 National
Business Ethics Survey:
Workplace Ethics in
Transition (Arlington, VA:
Ethics Resource Center, 2012),
21. 23715_ch07_lores_181-
212.indd 195 13/07/13 5:14 PM

179. An effective leader is one who does well for
the stakeholders of the corporation
Effective leaders are good at getting followers to
common goals effectively and efficiently
Power refers to the influence that leaders and
managers have over the behavior and
decisions of subordinates
A individual has power when his/her presence
causes people to behave differently
Power and influence shape corporate culture
179
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

180. Reward power: Offering something
desirable to influence behavior
Coercive power: Penalizing negative
behavior
Legitimate power: The consensus that a
person has the right to exert influence over
others
Expert power: Derives from knowledge and
credibility with subordinates
Referent power: Exists when goals or
objectives are similar
180
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

181. A force within the individual that focuses
behavior toward achieving a goal
Job performance: A function of ability and
motivation
An individual’s hierarchy of needs may influence
motivation and ethical behavior
Relatedness needs: Satisfied by social and
interpersonal relationships
Growth needs: Satisfied by creative or productive
activities
Needs or goals may change over time
181
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

182. Decision making authority is concentrated in
the hands of top-level managers
Little authority delegated to lower levels
Best for organizations…
That make high-risk decisions
Whose lower-level managers are not skilled in
decision-making
Where processes are routine
May have a harder time responding to ethical
issues
182
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

183. Decision making authority is delegated as far
down the chain of command as possible
Flexible and quicker to recognize external
change
Can be slow to recognize organizational policy
changes
Units may diverge and develop different value
systems
Ethical misconduct may result
183
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

184. 184
Structural Comparison of
Organizational Types Emphasis
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Characteristic Centralized Decentralized
Hierarchy of authority Centralized Decentralized
Flexibility Low High
Adaptability Low High
Problem recognition Low High
Implementation High Low
Dealing with changes
Poor environmental
complexity
Good
Rules and procedures Many and formal Few and informal
Division of labor Clear-cut Ambiguous
Span of control Many employees Few employees
Use of managerial techniques Extensive Minimal
Coordination and control
Formal and
impersonal
Informal and
personal

185. 185
Examples of Centralized and
Decentralized Corporate Cultures
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

186. 186
Examples of Centralized and
Decentralized Corporate Cultures
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Company
Organizational
Culture
Characterized by
Nike Decentralized Creativity, freedom, informality
Southwest Airlines Decentralized
Fun, teamwork orientation,
loyalty
General Motors Centralized
Unions, adherence to task
assignments, structured
Microsoft Decentralized
Creative, investigative, fast
paced
Proctor & Gamble Centralized
Experienced, dependable, a rich
history and tradition of
products, powerful

187. Formal groups
Committees, work groups, and teams
Informal groups
The grapevine
Group norms
Standards of behavior that groups expect of
members
Define acceptable/unacceptable behavior within
the group
187
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

188. 188
Variation in
Employee Conduct*
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
* Estimates based on the author’s research and reports from ethics and compliance officers from
many industries. 23715_ch07_lores_181-212.indd 205 13/07/13 5:14 PM
10% 40% 40% 10%
Follow their own
values and
beliefs; believe
that their values
are superior to
those of others in
the company
Always try to
follow company
policies
Go along with
the work group
Take advantage
of situations if
the penalty is less
than the benefit
and the risk of
being caught is
low

189. Ethical decisions are often made by
committees and formal and informal
groups
Many decisions are beyond the influence of
individuals
Congruence between individual and
organizational ethics—increases potential for
making ethical decisions
Individuals need experience to understand
how to resolve ethical issues
189
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190. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 190
Part Four
Implementing
Business Ethics
in a Global
Economy
Chapter 8
Developing an
Effective Ethics
Program

191. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 191
Corporations have the same rights and
responsibilities as individuals
All employees must obey laws and regulations
defining acceptable business conduct
Corporate culture without values and
appropriate communication about ethics can
facilitate individual misconduct
Ethical corporate culture does not evolve, but
requires ethical polices
Implementing a corporate ethics program
promotes the corporation as a moral agent

192. 192
Most Common Observed
Forms of Misconduct
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Ethics Resource Center, National Business Ethics Survey ® of Fortune 500 ® Employees: An Investigation into the
State of Ethics at America's Most Powerful Companies (Arlington, VA: Ethics Resource Center, 2012).

193. 193
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
It is nearly impossible to know all relevant laws
Ethics programs increase ethical awareness
Organizations can become bad barrels
Pressures to succeed create opportunities
rewarding unethical decisions
Established ethics programs help employees
determine what behaviors are acceptable
Top management must integrate these codes,
values and standards into the corporate culture

194. 194
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
A strong ethics program includes
Written codes of conduct
Ethics officers to oversee the program
Careful delegation of authority
Formal ethics training
Rigorous auditing, monitoring, enforcement,
and revision of program standards

195. 195
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Effective ethics program ensure that all
employees understand and comply with
the ethical culture
Cannot assume employees know how to
behave when entering a new job
Ethics programs act as important deterrents
to organizational misconduct

196. 196
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The FSGO encourages assessing key risks
Firms can use assessments to update their
internal control mechanisms
Ethics programs must be designed and
implemented to address these risks
Ethics programs can help a firm avoid civil
liability if they show due diligence in preventing
misconduct

197. 197
Minimum Requirements
for Ethics/Compliance
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Adapted from U.S. Sentencing Commission, Federal Sentencing Guidelines Manual , effective November 1, 2004 (St.
Paul, MN: West, 2008).
1. Standards and procedures, such as codes of ethics, that are
reasonably capable of detecting and preventing misconduct
2. High-level personnel who are responsible for an ethics and
compliance program
3. No substantial discretionary authority given to individuals with a
propensity for misconduct
4. Standards and procedures communicated effectively via ethics
training programs
5. Systems to monitor, audit, and report misconduct
6. Consistent enforcement of standards, codes, and punishment
7. Continuous improvement of the ethics and compliance program

198. 198
Which is Justified to
Survive
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Ernst & Young, Growing Beyond: a place for integrity—12th Global Fraud Survey ,
http://www.ey.com/Publication/vwLUAssets/Global-Fraud-Surveya-place-for-integrity-12th-Global-Fraud-Survey/$FILE/EY-
12th-GLOBAL-FRAUD-SURVEY.pdf (accessed May 6, 2013).

199. 199
Compliance Versus Values
Orientation
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Compliance orientation
Requires employees identify with and commit to
specific conduct
Uses legal terms, statutes, and contracts to teach
the rules and penalties for noncompliance
Values orientation
Strives to develop shared values; focuses on ideals,
such as accountability and commitment
Is more effective at creating ethical reasoning, the
foundation of an organizational ethical culture

200. 200
Codes of
Conduct
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Formal statements that describe what an
organization expects of its employees
Codes of ethics
Most comprehensive; consists of general
statements serving as principles and the basis for
the rules in a code of conduct
Statement of values
Serves the general public and addresses
stakeholder interests

201. 201
Benefits Of Having
An Ethics Code
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “Ten Benefits of Having an Ethics Code,” Josephson Institute Center for Business Ethics, http://josephsoninstitute.org/
business/blog/2010/11/tenbenefits-of-having-an-ethics-code/ (accessed March 14, 2010). Originally adapted from Good Ideas for
Creating a More Ethical and Effective Workplace.
A Comprehensive Code of Conduct Can…
1. Guide employees in situations where the ethical course of action is not immediately obvious.
2. Help the company reinforce—and acquaint new employees with—its culture and values. A
code can help create a climate of integrity and excellence.
3. Help the company communicate its expectations for its staff to suppliers, vendors, and
customers.
4. Minimize subjective and inconsistent management standards.
5. Help a company remain in compliance with complex government regulations.
6. Build public trust and enhance business reputations.
7. Offer protection in preempting or defending against lawsuits.
8. Enhance morale, employee pride, loyalty, and the recruitment of outstanding employees.
9. Promote constructive social change by raising awareness of the community’s needs and
encouraging employees and other stakeholders to help.
10. Promote market efficiency, especially in areas where laws are weak or inefficient, by
rewarding the best and most ethical producers of goods and services.

202. 202
Developing/Implementing
a Code of Ethics/Conduct
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1. Consider areas of risk and state the values as well as conduct
necessary to comply with laws and regulations. Values are an
important buffer in preventing serious misconduct.
2. Identify values that specifically address current ethical issues.
3. Consider values that link the organization to a stakeholder
orientation. Attempt to find overlaps in organizational and stakeholder
values.
4. Make the code understandable by providing examples that reflect
values.
5. Communicate the code frequently and in language that employees
can understand.
6. Revise the code every year with input from organizational members
and stakeholders. © Cengage Learning 2015

203. 203
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Often contain six core values
1.Trustworthiness
2.Respect
3.Responsibility
4.Fairness
5.Caring
6.Citizenship

204. 204
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Ethics officers are responsible for managing
the ethics and legal compliance programs
Assess needs and risks
Develop and distribute the code
Conduct training programs for employees
Confidentially answer employees’ questions
Ensure government compliance
Monitor and audit ethical conduct
Take action on possible code violations
Review and update the code

205. 205
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Ethics training can
Educate employees about policies, expectations,
laws, regulations, and general social standards
Raise awareness of resources and support systems
Empower employees
Top executives must communicate and
enforce ethical standards
Employees need to know whom to contact for
guidance when encountering gray areas

206. 206
Goals Of Successful Ethics
Training Programs
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Replace with table 8.5, fix source text
1. Identify key risk areas employees will face.
2. Provide experience in dealing with hypothetical or disguised ethical issues
within the industry through mini-cases, online challenges, DVDs, or other
experiential learning opportunities.
3. Let employees know wrongdoing will never be supported in the organization
and employee evaluations will take their conduct in this area into consideration.
4. Let employees know they are individually accountable for their behavior.
5. Align employee conduct with organizational reputation and branding.
6. Provide ongoing feedback to employees about how they are handling ethical
issues.
7. Allow a mechanism for employees to voice their concerns that is anonymous,
but provides answers to key questions (24-hour hotlines).
8. Provide a hierarchy of leadership for employees to contact when they are faced
with an ethical dilemma they do not know how to resolve.
© Cengage Learning 2015

207. 207
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Effective programs employ various methods
to measure effectiveness
Observing employees
Internal audits and investigations
Surveys
Reporting systems
External audits
Consistent enforcement and necessary
disciplinary action are essential to a functional
ethics or compliance program

208. 208
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Improving a system differs little from
implementing any other business strategy
To improve its ethical performance, a
company may change how it makes decisions
Centralize decisions, or decentralize them
The key is to delegate authority carefully so
the organization can achieve ethical
performance

209. 209
Larger Companies and
Responsibility Reporting
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: KPMG International Corporate Responsibility Reporting Survey, 2011,
http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/corporateresponsibility/Documents/2011-survey.pdf
(accessed May 6, 2013).
Research performed on 3,400 global companies, including the world’s largest 250 companies

210. 210
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Failure to understand and appreciate goals
Setting unrealistic/immeasurable objectives
Unsupportive top management
Ineffective or incomprehensible content
Transferring an “’American” program to a
firm’s international operations
Designing a program that is little more than a
series of lectures resulting in low recall

211. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 211
Chapter 9
Managing and
Controlling Ethics
Programs
Part Four
Implementing
Business Ethics
in a Global
Economy

212. Five factors can impact success of ethics
programs
1.The content of the code of ethics
2.The frequency of communication regarding
the ethics program
3.The quality of communication
4.Senior management’s ability to incorporate
ethics into the organization
5.Local management’s ability to do the same
212
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

213. Organizations must focus on
implementation and planning an ethics
program
Should be part of strategic planning and
management activities
213
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

214. Proper selection of employees
Ethics training
Structural and communication systems
Ethics assistance line
Help desk
Management’s commitment to the program
Comparing standards against actual behavior
Ethics audit
214
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

215. A systematic evaluation of an organization’s ethics
program and performance to determine whether it
is effective
Regular, complete, and documented measurements
of compliance with policies and procedures
Can be a precursor to establishing an ethics program
Should be the most important part of an ethics
program
Primary purpose is to identify risks and problems in
activities and plan steps to adjust/correct/eliminate
concerns
Recent legislation encourages greater ethics audits
215
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

216. The process of accessing and reporting a
business’s performance in fulfilling its
economic, legal, ethical, and
philanthropic responsibilities expected by
stakeholders
Broader in scope than an ethics audit
An ethics audit might be a component
216
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

217. Detect misconduct before it becomes a major
problem
Identifies potential ethical issues and
improve legal compliance
Improve organizational performance
Improve relationships with stakeholders who
demand greater transparency
Sets goals against which to measure actual
performance
217
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

218. 218
Top Challenges
For CEOs
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N = 729 total responses. Response
rate varied for each challenge.
Source: The Conference Board, CEO
Challenge® 2013 Summary Report,
2013.
1.Human capital
2.Operational excellence
3.Innovation
4.Customer relationships
5.Global political/economic risk
6.Government regulation
7.Global expansion
8.Corporate brand and reputation
9.Sustainability
10.Trust in business

219. Plans to respond to and recover from
disasters that can disrupt operations,
destroy organizational reputation, and
erode shareholder confidence
Involves…
Contingency planning
Assessing organizational risks
Planning for potential occurrences
Providing tools to respond
219
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220. Ethical misconduct disasters progress in
stages
Ethical issue recognition
The decision to act unethically
Organization’s discovery of and response to the
act
Anticipation of and intervention can stave off
organizational disasters
Formal mechanisms in place to detect risk
220
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221. 221
Improving Organizational
Risk Management
Source: Ernst & Young, Risk Management for Asset Management: Ernst & Young Survey 2012 , 6–7,
http://www.ey.com/Publication/vwLUAssets/2012_EMEIA_asset_management_risk_survey/$FILE/Risk_Management_for_A
M_EY_Survey_2012.pdf (accessed May 14, 2013). 23715_
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1.Create a Regulatory Reform Project Management Office with the
appropriate governance to direct business and operating models and
manage risks proportionately.
2.Chief Risk Officers should report to Group CROs or board members.
3.Involve risk and compliance at the beginning of the product
development cycle.
4.Improve independent controls by setting appropriate governance
frameworks with which portfolio managers need to comply.
5.Manage and optimize the use of capital.

222. Nonfinancial performance measures are
crucial to a firm’s health
Measure wholeness and soundness of a company
“Return on integrity”
Many organizations and regulatory
frameworks offer a means of capturing
ethical performance
Structural
Behavioral
222
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223. 223
Description of
Measuring Tools
Source: “Balanced Scorecard Basics,”Balanced Scorecard Institute,
http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx (accessed May 14,
2013); “What is Six Sigma,” iSix Sigma, http://www.isixsigma.com/index.php?option=com_k2&view=item&id=1463:what-is-
six-sigma?&Itemid=155 (accessed May 14, 2013); “Triple bottom line,” The Economist , November 17, 2009,
http://www.economist.com/node/14301663?story_id=14301663 (accessed May 14, 2013). 23715_ch09_lores_239-271.indd 249
29/07/13 1:21 PM
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Measurement
Systems
Description
Balanced
Scorecard
Developed by Drs. Robert Kaplan and David Norton, the Balanced Scorecard
incorporates nonfinancial performance indicators into the evaluation system
to provide a more “balanced” view of organizational performance. The system
uses four metrics—financial, internal business processes, learning and growth,
and customer—to measure the overall performance of the firm.
Six Sigma
Six Sigma focuses on improving existing processes that do not meet quality
specifications or that need to be improved as well as developing new processes
that meet Six Sigma standards. To meet Six Sigma specifications, the process
must not produce more than 3.4 defects per million opportunities.
Triple Bottom
Line
This approach to measuring social, financial, and environmental factors (or
people, places, and planet) recognizes that business has a responsibility to
positively influence a variety of stakeholders, including customers, employees,
shareholders, community, and the natural environment. The challenge is how
to evaluate a business’s social and environmental impacts, since there are no
universally standard forms of measuring these criteria.

224. Six Sigma
Balanced Scorecard
Triple Bottom Line
Global Reporting Initiative
AccountAbility AA1000 framework
Open Compliance Ethics Group
224
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225. 225
AA 1000 Framework for
Ethics and Social Accountability
Source: Adapted from AccountAbility AA1000 Series of Standards, http://www.accountability21.net/aa1000series (accessed
March 12, 2009). Reprinted with permission of The Institute of Social and Ethical Accountability.
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226. 226
AA 1000 Framework for
Ethics and Social Accountability
Source: The Open Compliance Ethics Group Framework Overview, http://www.oceg.org/framework.asp (accessed April
4, 2006). Reprinted with permission.
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227. May uncover ethical problems a company
does not wish to disclose
May reveal a problem that cannot be
remedied
Stakeholders may be dissatisfied with the
information
Conducting ethics audits requires financial
and record keeping resources
No guarantee that auditing is the solution
Lack of standardization in auditing
227
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228. Audits should be unique to each company
The following steps provide a general
framework…
Secure management and board commitment
Establish an ethics audit committee
Define the scope of the audit
Review organizational mission, goals, and values
Collect and analyze relevant information
Verify the results through an outside agent
Report the findings
228
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229. 229
Framework for an
Ethics Audit
Sources: These steps are compatible with the social auditing methods prescribed by Warren Dow and Roy Crowe in What
Social Auditing Can Do for Voluntary Organizations (Vancouver: Volunteer Vancouver, July 1999), and Sandra Waddock and
Neil Smith in “Corporate Responsibility Audits: Doing Well by Doing Good,” Sloan Management Review 41 (2000), 79.
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•Secure the commitment of top managers and board of directors
•Establish a committee to oversee the ethics audit
•Define the scope of the audit process, includingsubject matter
areas important to the ethics audit
•Review the organization’s mission, policies, goals, and objectives
and define its ethical priorities
•Collect and analyze relevant information in each designated
subject matter area
•Have the results verified by an independent agent
•Report the findings to the audit committee and, if approved, to
managers and stakeholders

230. The first step in the auditing process
Sarbanes-Oxley requires that boards of
directors provide oversight
The board may initiate audits
Managers may request an ethics audit to
improve confidence in a firm’s reporting
processes
230
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231. 231
Model Corporate Social
Responsibility Structure
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232. The second step in the auditing process
Boards of directors financial audit committee
should oversee the audit
Managers or ethics officers conduct it in most
firms
Internal and external parties should be
involved
External auditors should not have other
consulting or conflict-of-interest relationships
with top managers or board members
232
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233. The ethics audit committee should establish
the scope of the audit and monitor its
progress
Scopeis determined by the type of business,
risks faced, and the opportunities to manage
ethics
233
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234. An ethics audit should…
Include a review of the current mission
statement and strategic objectives
Examine all formal and informal documents
that make commitments with regard to
ethical, legal, or social responsibility
A firm should define its ethical priorities at
this time
234
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235. Identify tools for measuring progress in
improving employees’ ethical decisions
Collect relevant subject matter
Internal and external documents
Determine a baseline level of compliance
235
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236. Determine all commitments
Stakeholders yield insights
Integrating stakeholder feedback is crucial in an
audit
Audits should compare organizational
performance to other comparable
organizations
236
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237. 237
Green Mountain Coffee’s
Code of Ethics
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Source: Adapted from GMC’s Code of Ethics,
http://investor.gmcr.com/documentdisplay.cfm?DocumentID=7206 (accessed May 14, 2013).
•Respect the rights and the property of others
•Maintain accurate records and report unethical behavior
•Comply with all laws, rules, and regulatory requirements
•Avoid conflicts of interest and any appearanceof impropriety
•Be responsible stewards in the use, protection, and management of GMCR’s assets
and resources
•Understand antitrust laws and uphold fair competitive practices
•Share GMCR’s story while following the Media Relations guidelines on consistent
communications
•Act with integrity while maintaining the confidentiality of GMCR information
•Support GMCR’s purpose, Principles, Policies, and Procedures and encourage
GMCR’s business partners to do so as well

238. 238
Where Cultures are Weaker,
Misconduct is More Prevalent
Source: Ethics Resource
Center, 2011 National
Business Ethics Survey:
Workplace Ethics in
Transition (Arlington, VA:
Ethics Resource Center,
2012), 20.
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239. Have an independent party verify the results
of the analysis
Companies often have results independently
audited
Verification is an assessment of the quality,
accuracy, and completeness of a company’s
social report
Should involve standard procedures to control
reliability and validity of information
239
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240. The final step in the auditing process
Spells out the purpose and scope of the audit,
methods used, role of the author, and auditing
and reporting guidelines
May be disseminated internally or externally
Ethics audits are similar to financial audits, but
forms are different
Unqualified opinion
Qualified opinion
Adverse opinion
Disclaimer of opinion
240
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241. Should be conducted regularly
Provides a benchmark of overall effectiveness
of ethics initiatives
Can be important in asset allocation and program
development
Can demonstrate the positive impact of
ethical conduct and social responsibility
initiatives on the firm’s bottom line
241
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242. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 242
Part Four
Implementing
Business Ethics
in a Global
Economy
Chapter 10
Business Ethics in
a Global Economy

243. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 243
Brings together people from countries with
varying cultures, values, laws, and ethical
standards
International businesspeople must
understand the values, culture, and ethical
standards of their own country
Must be sensitive to the same in other
countries
Success requires understanding the global
business environment

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Country cultural values: Are specific to
countries, regions, sects or groups
National culture: Everything in our
surroundings that is made by people
Both tangible and intangible
Each nation has a cultural belief about acceptable
business activities
Subcultures can be found within many nations

245. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 245
Geert Hofstede identified four cultural
dimensions that impact the business
environment
Individualism/collectivism
Power distance
Uncertainty avoidance
Masculinity/femininity

246. 246
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The unconscious reference to one’s own
cultural values, experiences, and
knowledge
The idea that “we” differ from “them”
Common in international business
We react based on our knowledge
Accumulated over a lifetime
Grounded in culture of origin

247. 247
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The concept that morality varies from one
culture to another
Believes ‘right’ and ‘wrong’ is defined
differently by each culture
Can be a rationalization for straying from
one’s cultural values

248. 248
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Shared across most cultures; often based
on religion, reflected by law
Desirable common values
Integrity, family and community unity, equality,
honesty, fidelity, sharing, and unselfishness
Undesirable common values
Ignorance, pride and egoism, selfish desires, lust
greed, adultery, theft, deceit, lying, murder,
hypocrisy, slander, and addiction

249. 249
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Economic and political events and natural
disasters can affect the global ethical decision
making environment
Many ethical issues emerge in coping with crises
The last global recession caused massive
public distrust
People are now discussing, and even revising,
some fundamental capitalism concepts and
assumptions

250. 250
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Occurs when corporate profit centers are
unaware of the consequences of their
decisions on the firm as a whole
No single person can be blamed, the problem
is systemic

251. 251
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Adam Smith
Laissez-faire capitalism
John Maynard Keynes
Government can stimulate the private sector
Milton Friedman
Return to self-regulating free market system

252. 252
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1.People have rational preferences among
outcomes that can be identified and
associated with value
2.Individuals seek to maximize utility; firms
seek to maximize profits
3.People act independently on the basis of full
and relevant information

253. 253
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Socialism: Advocates that wealth and power
be shared across society, based on the
amount of work expended in production
Karl Marx
Social democracy: Private ownership of
property, but a large government
Formed in the 1940s as an offshoot of socialism
Bimodal wealth distribution: Many poor
people, concentrated wealth at the top and a
small middle class
Multinational corporations concentrate control of
the global economy to a few companies

254. 254
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Rational economics: Assumes that people
are predictable and base their decisions on
maximizing utility based on resources
Behavioral economics: Assumes that
humans do not always act rationally due to
genetics, emotions and learned behavior

255. 255
Economic Capitalism
Country Differential
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© Cengage Learning 2015

256. 256
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Public companies that operate on a global
scale, without significant ties to any one
nation or region
The highest level of international business
commitment
Characterized by a global strategy of focusing
on opportunities throughout the world
Subject of much ethical debate due to their
size and financial power

257. 257
Business for Social
Responsibility (BSR)
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Many MNCs have joined this globally based
resource system
Tracks emerging issues and trends
Provides information on corporate leadership
and best practices
Conducts educational workshops and
training
Assists organizations in developing practical
business ethics tools

258. 258
Comparing Countries and
Corporations
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Adapted from “Global 500: Fortune’s Annual Ranking of the World’s Largest Corporations,” CNNMoney, http://money.cnn.com/magazines/fortune/
global500/2012/full_list/ (accessed May 16, 2013). CIA World Fact Book , https://www.cia.gov/library/publications/the-world-factbook/fields/2195.html
(accessed May 16, 2013).
Country GDP (millions in
$ U.S.)
Company Revenues
(millions $ U.S.)
United States 15,650,000 Royal Dutch Shell 484,489.0
China* 12,380,000 Exxon Mobile 452,926
Japan 5,984,000 Walmart 446,950
Germany 3,367,000 BP 386,463
India 1,947,000 Sinopec Group 375,214
Iran 483,800 China National Petroleum 352,338
Argentina 474,800 State Grid 259,142
Taiwan 474,100 Chevron 245,621
Denmark 309,200 ConocoPhillips 237,272
Greece 255,000 Toyota Motor 235,364
*Note: Because China bases its exchange rate on the fiat, purchasing power parity was used to get a better
comparison of its GDP compared to other countries.

259. 259
The International
Monetary Fund (IMF)
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Emerged from Bretton Woods agreement, 1944
Makes short-term loans to member countries
Provides foreign currencies for its members
Promotes responsible business conduct
Recommended new rules for large firms
which represent the biggest systemic risk

260. 260
The United
Nations (UN)
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Founded in 1945; 193 member nations
Goal to promote world peace, improve inter-
country relations, and support better
standards and human rights
Focuses on environmental and human rights
issues

261. 261
The United Nations
Global Compact
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A set of ten principles promoting human
rights, sustainability, and the eradication of
corruption
Collaborative arrangement between
businesses, governments, NGOs, societies,
and the UN
Voluntary membership
Members report on progress toward goals

262. 262
Ten Principles of the UN
Global Compact
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Human Rights
• Principle 1: Businesses should support and respect the protection of internationally
proclaimed human rights; and
• Principle 2: make sure that they are not complicit in human rights abuses.
Labour
• Principle 3: Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory labour;
• Principle 5: the effective abolition of child labour; and
• Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
• Principle 7: Businesses should support a precautionary approach to environmental
challenges;
• Principle 8: undertake initiatives to promote greater environmental responsibility; and
• Principle 9: encourage the development and diffusion of environmentally friendly
technologies.
Anti-Corruption
• Principle 10: Businesses should work against corruption in all its forms, including extortion
and bribery.
Source: “The Ten Principles,” United Nations Global Compact, http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html (accessed
May 16, 2013).

263. 263
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Established in 1995 at the Uruguay round of
the General Agreement on Tariffs and Trade
(GATT); 159 member and observer nations
Administers trade agreements, facilitates trade
negotiations and settles trade disputes
Monitors trade policies of member nations
Addresses economic and social issues of many
industries; attempts to reduce trade barriers
Provides legally binding ground rules for commerce
Not all countries agree with the WTO on free trade

264. 264
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The practice of charging high prices for
products in domestic markets, while
selling the same products in foreign
markets at low prices; often below cost
Places local firms at a disadvantage
The U.S. has anti-dumping laws in place

265. 265
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Key areas of international risk
Emerging markets carry significant risks for
international investors
Chinese leadership is promoting
nationalism, which could threaten its
relationships with other countries
The economic outlook for many Eurozone
countries remains weak

266. 266
Global Business Ethics and
Legal Issues
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U.S.
Ranking
European
Ranking
Important Issues
1 1 Code of Conduct
2 5 U.S. Antitrust
3 3 Mutual Respect
4 7 U.S. Foreign Corrupt Practices Act (FCPA)
5 4 Conflicts of Interest and Gifts
6 9 Proper Use of Computers
7 Insider Trading
8 6 Financial Integrity
9 Confidentiality
10 Records Management
11 Labor and Employment Law
12 8 Intellectual Property
2 Global Competition Law
10 Global Anti-bribery Requirements
11 Ethics and Values
12 Export Controls
Source: Adapted from
Integrity Interactive
Corporation, “Top
Compliance Concerns of
Global Companies,”
http://www.i2c.com
(accessed May 16, 2013).

267. 267
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Bribery’s acceptance varies by country
Can be a challenge to determine what a bribe is
Bribery laws and regulations
The U.S. Foreign Corrupt Practices Act (FCPA)
prohibits companies from paying foreign officials
to keep/obtain business, with exceptions
The U.K. Bribery Act goes much further
Most developed countries recognize bribery
is not conducive to business
However, companies must determine what
constitutes a bribe

268. 268
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Antitrust laws are meant to encourage fair
competition
Countries have differing levels of protections
Can create difficulties in international business
Vertical system: A channel member controls
the entire business system
Can occur when MNCs are allowed to grow
unchecked and create a monopoly
Reduces competition and can put small
competitors out of business

269. 269
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Serious Internet crimes have garnered public
attention
Cyber hacking, Trojan horses, worms and malware
Privacy violations
Hacking into people’s personal accounts
Tracking users through their mobile phone apps
Company’s use of personal information

270. 270
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
An inherent dignity with equal and
inalienable rights
The foundation of freedom, justice, and world peace
Codified in the UN Human Rights Declaration
Is becoming a serious issue for companies due to
the health care issue
Many question whether health care is a right or a
privilege

271. 271
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
A major global human rights issue
Over a billion people lack access to health
care globally
Patents assign rights to companies, who can
charge what they wish
Some companies are dropping costly
employee insurance plans, leaving more
people without affordable insurance

272. 272
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Many people work outside their homeland
International firms today have many global
ethical concerns related to labor
Gender pay equality
Right to join unions
Standards of living

273. 273
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Living wage: The minimum wage that
workers require to meet basic needs
Some MNCs choose to outsource to countries that
do not have a minimum wage
Executive compensation
A major topic during the last global recession
Growing global demand for alignment between
managerial performance and compensation

274. 274
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The belief that consumers should dictate
the economic structure of society
States that consume goods at an increasing
rate is desirable
Equates personal happiness with purchasing
and consuming products
Made-to-break(Planned obsolescence):
Encourages consumers to buy more items
Detractors use the U.S. as an example of non-
sustainable consumption

275. 275
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Ethical decision making is essential to
successfully operating a global business
Some MNCs have created officers/committees
to oversee global compliance issues
Successful implementation of a global ethics
program requires extensive employee training
Global firms must tailor programs to
international markets
Global ethics is not “one size fits all”

276. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 276
Chapter 11
Ethical Leadership
Part Four
Implementing
Business Ethics
in a Global
Economy

277. Leadershipis the ability or authority to
guide and direct others toward a goal
Ethical leadership creates an ethical culture
Have the power to motivate others and
enforce the organization’s norms, policies,
and viewpoints
Positive relationship with the organizational
citizenship of employees and a negative
relationship with deviance or misconduct
277
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

278. In many situations the actions of co-workers
profoundly impacts the ethical decisions of
employees
Many CEOs articulate the firm’s core values but
fail to exhibit ethical leadership
A leader must have followers’ respect and also
provide a standard of conduct
Failure to demonstrate effective leadership
qualities at the top creates the perception that
managers either do not care about the company’s
ethics program or they feel they are above ethics
and compliance requirements
278
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

279. 279
Leaders Admired for
Ethical Conduct
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “10 Most Ethical CEOs in America,” Online MBA, March 28, 2012, http://www.onlinemba.com/blog/10-most-
ethical-ceos-in-corporate-america/ (accessed April 25, 2013).
LeadersCompany Ethical Leadership Activities
Warren
Buffett
Berkshire
Hathaway
•Promotes ethical conduct as a necessity of business
•Shares responsibility and decision making with managers of
various companies
Howard
Schultz
Starbucks
•Offers healthcare topart-time workers
•Developed Create Jobs for USA program to fund small businesses
in America
Tony Hsieh Zappos
•Creates a fun work environment for employees; encourages
employees to make decisions
•Stresses an environment of quality customer service
Kenneth
Chenault
American
Express
•Used his strong work ethic to turn around the struggling
company
•Noted for ensuring that stranded cardholders found a way home
during the September 11
th
attacks and approved a $1 million
donation to the families of American Express employees lost in
the tragedy
Kip Tindell
The
Container
Store
•Creates a corporate culture in which employees feel appreciated
and motivated to perform beyond expectations
•Employees are provided with better pay and more training than
competing retailers

280. Ethical leadership skills develop through years of
training, experience, and learning other best-
practices of leadership
Leadership qualities differ for each situation
Ethical leaders must model organizational values
Place what is best for the organization over their own
interests
Train and develop employees throughout their careers
Establish reporting mechanisms
Understand employee values and perceptions
Recognize the limits of organizational rules and values
280
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

281. Strong ethical leaders are those passionate
about the organization and act in the
organization’s best interests
Ethical leadership is highly unlikely without
strong personal character
Ethical leaders do not wait for ethical
problems to arise
Ethical leaders must model the
organization’s values
281
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

282. 282
Seven Habits of Strong
Ethical Leaders
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1.Ethical leaders have strong personal character.
2.Ethical leaders have a passion to do right.
3.Ethical leaders are proactive.
4.Ethical leaders consider all stakeholders’ interests.
5.Ethical leaders are rolemodels for the organization’s values.
6.Ethical leaders are transparentand actively involved in decision
making.
7.Ethical leaders take a holistic view of the firm’s ethical culture.

283. 283
Whole Foods'
Core Values
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “Our Core Values,” Whole Foods Markets,
www.wholefoodsmarket.com/company/corevalues.php (accessed April 25, 2013).
•Selling the highest quality natural and organic products
•Satisfying and delightingour customers
•Supporting team member happiness and excellence
•Creatingwealth through profits and growth
•Caring about our communitiesand our environment
•Creating ongoing win-win partnerships with our suppliers
•Promoting the health of our stakeholders through healthy eating
education

284. Has a direct impact on the corporate culture of the
firm
Communicate and monitor an organization’s values,
ensuring that employees are familiar with the
company’s purpose and beliefs
Provide cultural motivations for ethical behavior, such
as reward systems for ethical conduct
Can lead to higher employee satisfaction and employee
commitment
Creates strong relationships with external stakeholders
Positive association between ethical commitment of
employees and a firm’s valuation on the stock market
284
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

285. Compliance-based approach emphasizes
obedience to rules and regulations and sets
processes in place to ensure compliance
Integrity-based approach views ethics as an
opportunity to implement core values
Take responsibility for the firm’s ethical culture
and hold employees accountable for practicing
ethical behaviors and core practices
285
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

286. Unethical leaders are usually ego-centric and
often do whatever it takes to achieve the
organization’s objectives and their own
Apathetic leaders are not necessarily
unethical, but they care little for ethics
within the company
Does not listen to employees and does not
communicate well
Ethical leaders include ethics at every
operational level and stage of the decision
making process
286
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

287. Ethical conflicts occur when there are
two or more positions on an ethical
decision
Will not be brought to management’s
attention without effective mechanisms for
transparent communication
Employees themselves should be trained to
handle conflict situations
287
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

288. Categorize conflict management into five
styles: competing, avoiding,
accommodating, collaborating, and
compromising
Based on two dimensions:
Assertiveness is acting in one’s own best interests
Cooperativeness means working toward the best
interests of the other person
288
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

289. 289
Conflict Management
Styles
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Adapted from Kenneth W. Thomas and Ralph H. Kilmann (March 2, 2010). Thomas-
Kilmann Conflict Mode Instrument: Profile and Interpretative Report. © CPP, Inc.

290. Competing conflict management style: Highly
assertive, not very cooperative, believe in
winning at any cost, and measure success by how
much the other side loses
Avoiding conflict management style: Not
effective because they avoid conflict at any cost
even if it leads to misconduct, are uncooperative,
and are non-assertive
Accommodating conflict management style:
Highly cooperative, non-assertive, and give in to
the other side even if it means sacrificing their
own interests and values
290
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

291. Compromising conflict management style: In
between the assertiveness and cooperativeness
dimensions, believe best approach to resolving
conflicts is for each side to give something up in
order to gain something of value
Collaborating conflict management style: Most
advantageous, leaders are cooperative and
assertive, and leaders collaborate with others to
find a creative way to obtain a beneficial solution
291
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

292. Employee empowerment is an essential
component of a values-based organizational
culture
Encourages employees to express concerns, bring
up ethical issues, and take a proactive approach
toward resolving conflicts
Ethical leadership training for both managers
and employees is helpful
Important in creating employee-centered ethical
leadership
292
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

293. 293
Communication for
Becoming A Better Leader
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Adapted from David K. Grossman, “13 Ways to Become a Better Leader,” The Public Relations
Strategist , Winter 2012, pp. 12–13.
1.Have the tough conversations that you’ve been meaning to have, including
telling people what they need (and not necessarily want) to hear.
2.Stop talking and listen more.
3.Pick up the phone or walk down the hall to actually talk with someone rather
than relying on more impersonal emails.
4.Communicate bad news in the same way, with the same zest, as good news.
5.Share performance feedback with others regularly so that others know how
they can improve.
6.Be purposeful and thoughtful in how you communicate.
7.Ask for feedback so you can improve your skills.
8.Work on your blind spots in your leadership abilities.

294. Transparency and reporting are two major
dimensions of ethical communication
Create transparency by developing a culture
where ethics is frequently discussed
Reporting is a two-way process in which the
communicator communicates with superiors
and subordinates
Can be formal or informal
294
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

295. 295
Four Categories
Of Communication
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

296. Organizational communication is
separated into four categories:
1.Interpersonal communication is the most
well-known form of communication and
occurs when two or more people interact
with one another
Often difficult to communicate to a superior
Ethical leader must work to reassure employees by
balancing the interests of all relevant stakeholders
296
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

297. 2.Small group communication is growing in
organizations
Can increase collaboration and generate a variety
of difficult perspectives and opinions on a
particular issue
Groupthink occurs when one or more group
members feel pressured to conform to the group’s
decision even if they personally disagree
Group polarization refers to the fact that a group
is more likely to move toward a more extreme
position than the group members might have done
individually
297
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

298. 3.Nonverbal communication is
communication expressed through actions,
body language, expressions, or other forms
of communication not written or oral
Nonverbal cues are deemed more reliable that
what he or she states verbally
4.Listening involves paying attention to both
verbal and nonverbal behavior
Without listening, communication becomes
ineffective
Good listening skills tend to establish credibility
and trustworthiness with employees
298
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

299. 299
Ways to Avoid Groupthink in
Small-Group Decision Making
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Irving L. Janis (1972). Victims of Groupthink: a Psychological Study of Foreign-Policy Decisions and
Fiascos. Boston, MS: Houghton-Mifflin.
1.Emphasize to each team member that he or she is a “critical
evaluator” with the responsibility to express opinions and
objections freely
2.Eliminate leadership biases by refusing to express an opinion
when assigning tasks to a group
3.Set up a number of independent groups to work on the same issue
4.Encourage each team member to express the group’s ideas with
someone he or she can trust from outside the group
5.Express the need to examine all alternatives
6.Invite outside experts into group meetings, and allow members to
interact with these experts
7.Assign one person to be “Devil’s advocate”

300. Leader-follower congruence occurs when
leaders and followers share the same vision,
ethical expectations, and objectives for the
company
Leader-exchange theory claims that leaders
form unique relationships with followers
through social interactions
Important for ethical leaders to frequently
communicate and interact with employees
300
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

301. One of the most observable ways of
communicating ethical values to employees
is through codes of ethics and training in
how to act in different situations
Codes of ethics provide important guidelines for
employees on how to act in different situations
Leader-follower communication connects
followers with those in the company who are
most familiar with the firm’s ethical values
301
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

302. Ethical leaders can mitigate power differences
through frequent communication with workers
Organizational politics is often perceived as
trying to achieve one’s own ends even if it means
harming others in the organization
Gossip, manipulation, playing favorites, and taking
credit for another’s work
There is a difference between having a high
degree of office politics and having good political
skills
Political skills can be used to promote organizational
goals and help rather than hinder other employees
302
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

303. Most companies recognize the need for
organizational leaders to provide feedback to
employees
Informal methods like simple conversation or
through more formal systems such as employee
performance evaluations
Need for organizational leaders to get feedback
from their employees
Employee feedback can be generated in many
different ways, including interviews, anonymous
surveys, ethical audits and websites
303
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

304. The most effective ethical leaders possess the
ability to manage themselves and their
relationships with others effectively, a skill
known as emotional intelligence
1.Coercive leader
2.Authoritative leader
3.Affiliative leader
4.Democratic leader
5.Pacesetting leader
6.Coaching leader
304
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

305. Transactional leaders attempt to create
employee satisfaction through negotiating, or
“bartering,” for desired behaviors or levels of
performance
Transformational leaders strive to raise
employees’ level of commitment and foster trust
and motivation
Authentic leaders are passionate about the
company, live out corporate values daily in their
behavior in the workplace, and form long-term
relationships with employees and other
stakeholders
305
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

306. When ethical misconduct or issues arise, the leader
should have plans in place to answer stakeholder
concerns and recover from misconduct
The acronym RADAR is used to describe an ethical
leader’s duty to:
Recognizeethical issues
Avoidmisconduct whenever possible
Detect ethical risk areas
Answerstakeholder concerns when an ethical issue
comes to light
Recoverfrom a misconduct disaster by improving
upon weaknesses in the ethics program
306
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

307. 307
The RADAR
Model
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
© Linda Ferrell, 2013

308. 308
Questions to Ask for Discovery
and Assessment Processes
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Adapted from Lynn Brewer, Robert Chandler, and O.C. Ferrell (2006). Managing Risks for Corporate Integrity
(Mason, OH: Thomson), 76–84.
•Does the company have a written code of ethics?
•Have individuals from high-level positions in the organization
been assigned overall responsibilityto oversee compliance with
standards and procedures?
•What are the processes or other means by which ethics are
integrated into any or all manufacturing,marketing, distribution,
electronic commerce, and general corporate strategy decisions?
•Is there a review process wherebylegal, ethical, and business
practice considerations are presented, reviewed, or otherwise
considered by the board of directors?
•What steps has the company taken to communicate its standards,
procedures, and policies to all employees through training
programs or publications that describe company expectations?

309. 309
Questions to Ask for Discovery
and Assessment Processes
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Adapted from Lynn Brewer, Robert Chandler, and O.C. Ferrell (2006). Managing Risks for Corporate Integrity
(Mason, OH: Thomson), 76–84.
•Has the organization taken reasonable steps to achieve
compliance by utilizing, monitoring, and auditing systems
designed to detect misconduct and by providing a reporting
systemwhereby employees can report without fear of retaliation?
•Is adherence to and implementation of, the code of ethics one of
the standardsby which the corporate culture can be linked
directly to performance measures?
•Has the organization used due care not to delegate substantial
responsibility to individuals that it knows does not have the
ability to implement organization wide risk-reduction processes?
•Have the standards been sufficiently enforced through
appropriate methods, such as discipline of employees who violate
ethical policies?

310. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 310
Chapter 11
Ethical Leadership
Part Four
Implementing
Business Ethics
in a Global
Economy

311. Leadershipis the ability or authority to
guide and direct others toward a goal
Ethical leadership creates an ethical culture
Have the power to motivate others and
enforce the organization’s norms, policies,
and viewpoints
Positive relationship with the organizational
citizenship of employees and a negative
relationship with deviance or misconduct
311
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

312. In many situations the actions of co-workers
profoundly impacts the ethical decisions of
employees
Many CEOs articulate the firm’s core values but
fail to exhibit ethical leadership
A leader must have followers’ respect and also
provide a standard of conduct
Failure to demonstrate effective leadership
qualities at the top creates the perception that
managers either do not care about the company’s
ethics program or they feel they are above ethics
and compliance requirements
312
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

313. 313
Leaders Admired for
Ethical Conduct
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “10 Most Ethical CEOs in America,” Online MBA, March 28, 2012, http://www.onlinemba.com/blog/10-most-
ethical-ceos-in-corporate-america/ (accessed April 25, 2013).
LeadersCompany Ethical Leadership Activities
Warren
Buffett
Berkshire
Hathaway
•Promotes ethical conduct as a necessity of business
•Shares responsibility and decision making with managers of
various companies
Howard
Schultz
Starbucks
•Offers healthcare topart-time workers
•Developed Create Jobs for USA program to fund small businesses
in America
Tony Hsieh Zappos
•Creates a fun work environment for employees; encourages
employees to make decisions
•Stresses an environment of quality customer service
Kenneth
Chenault
American
Express
•Used his strong work ethic to turn around the struggling
company
•Noted for ensuring that stranded cardholders found a way home
during the September 11
th
attacks and approved a $1 million
donation to the families of American Express employees lost in
the tragedy
Kip Tindell
The
Container
Store
•Creates a corporate culture in which employees feel appreciated
and motivated to perform beyond expectations
•Employees are provided with better pay and more training than
competing retailers

314. Ethical leadership skills develop through years of
training, experience, and learning other best-
practices of leadership
Leadership qualities differ for each situation
Ethical leaders must model organizational values
Place what is best for the organization over their own
interests
Train and develop employees throughout their careers
Establish reporting mechanisms
Understand employee values and perceptions
Recognize the limits of organizational rules and values
314
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315. Strong ethical leaders are those passionate
about the organization and act in the
organization’s best interests
Ethical leadership is highly unlikely without
strong personal character
Ethical leaders do not wait for ethical
problems to arise
Ethical leaders must model the
organization’s values
315
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

316. 316
Seven Habits of Strong
Ethical Leaders
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1.Ethical leaders have strong personal character.
2.Ethical leaders have a passion to do right.
3.Ethical leaders are proactive.
4.Ethical leaders consider all stakeholders’ interests.
5.Ethical leaders are rolemodels for the organization’s values.
6.Ethical leaders are transparentand actively involved in decision
making.
7.Ethical leaders take a holistic view of the firm’s ethical culture.

317. 317
Whole Foods'
Core Values
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: “Our Core Values,” Whole Foods Markets,
www.wholefoodsmarket.com/company/corevalues.php (accessed April 25, 2013).
•Selling the highest quality natural and organic products
•Satisfying and delightingour customers
•Supporting team member happiness and excellence
•Creatingwealth through profits and growth
•Caring about our communitiesand our environment
•Creating ongoing win-win partnerships with our suppliers
•Promoting the health of our stakeholders through healthy eating
education

318. Has a direct impact on the corporate culture of the
firm
Communicate and monitor an organization’s values,
ensuring that employees are familiar with the
company’s purpose and beliefs
Provide cultural motivations for ethical behavior, such
as reward systems for ethical conduct
Can lead to higher employee satisfaction and employee
commitment
Creates strong relationships with external stakeholders
Positive association between ethical commitment of
employees and a firm’s valuation on the stock market
318
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

319. Compliance-based approach emphasizes
obedience to rules and regulations and sets
processes in place to ensure compliance
Integrity-based approach views ethics as an
opportunity to implement core values
Take responsibility for the firm’s ethical culture
and hold employees accountable for practicing
ethical behaviors and core practices
319
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

320. Unethical leaders are usually ego-centric and
often do whatever it takes to achieve the
organization’s objectives and their own
Apathetic leaders are not necessarily
unethical, but they care little for ethics
within the company
Does not listen to employees and does not
communicate well
Ethical leaders include ethics at every
operational level and stage of the decision
making process
320
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

321. Ethical conflicts occur when there are
two or more positions on an ethical
decision
Will not be brought to management’s
attention without effective mechanisms for
transparent communication
Employees themselves should be trained to
handle conflict situations
321
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

322. Categorize conflict management into five
styles: competing, avoiding,
accommodating, collaborating, and
compromising
Based on two dimensions:
Assertiveness is acting in one’s own best interests
Cooperativeness means working toward the best
interests of the other person
322
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323. 323
Conflict Management
Styles
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Adapted from Kenneth W. Thomas and Ralph H. Kilmann (March 2, 2010). Thomas-
Kilmann Conflict Mode Instrument: Profile and Interpretative Report. © CPP, Inc.

324. Competing conflict management style: Highly
assertive, not very cooperative, believe in
winning at any cost, and measure success by how
much the other side loses
Avoiding conflict management style: Not
effective because they avoid conflict at any cost
even if it leads to misconduct, are uncooperative,
and are non-assertive
Accommodating conflict management style:
Highly cooperative, non-assertive, and give in to
the other side even if it means sacrificing their
own interests and values
324
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

325. Compromising conflict management style: In
between the assertiveness and cooperativeness
dimensions, believe best approach to resolving
conflicts is for each side to give something up in
order to gain something of value
Collaborating conflict management style: Most
advantageous, leaders are cooperative and
assertive, and leaders collaborate with others to
find a creative way to obtain a beneficial solution
325
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

326. Employee empowerment is an essential
component of a values-based organizational
culture
Encourages employees to express concerns, bring
up ethical issues, and take a proactive approach
toward resolving conflicts
Ethical leadership training for both managers
and employees is helpful
Important in creating employee-centered ethical
leadership
326
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

327. 327
Communication for
Becoming A Better Leader
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Adapted from David K. Grossman, “13 Ways to Become a Better Leader,” The Public Relations
Strategist , Winter 2012, pp. 12–13.
1.Have the tough conversations that you’ve been meaning to have, including
telling people what they need (and not necessarily want) to hear.
2.Stop talking and listen more.
3.Pick up the phone or walk down the hall to actually talk with someone rather
than relying on more impersonal emails.
4.Communicate bad news in the same way, with the same zest, as good news.
5.Share performance feedback with others regularly so that others know how
they can improve.
6.Be purposeful and thoughtful in how you communicate.
7.Ask for feedback so you can improve your skills.
8.Work on your blind spots in your leadership abilities.

328. Transparency and reporting are two major
dimensions of ethical communication
Create transparency by developing a culture
where ethics is frequently discussed
Reporting is a two-way process in which the
communicator communicates with superiors
and subordinates
Can be formal or informal
328
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

329. 329
Four Categories
Of Communication
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

330. Organizational communication is
separated into four categories:
1.Interpersonal communication is the most
well-known form of communication and
occurs when two or more people interact
with one another
Often difficult to communicate to a superior
Ethical leader must work to reassure employees by
balancing the interests of all relevant stakeholders
330
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

331. 2.Small group communication is growing in
organizations
Can increase collaboration and generate a variety
of difficult perspectives and opinions on a
particular issue
Groupthink occurs when one or more group
members feel pressured to conform to the group’s
decision even if they personally disagree
Group polarization refers to the fact that a group
is more likely to move toward a more extreme
position than the group members might have done
individually
331
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

332. 3.Nonverbal communication is
communication expressed through actions,
body language, expressions, or other forms
of communication not written or oral
Nonverbal cues are deemed more reliable that
what he or she states verbally
4.Listening involves paying attention to both
verbal and nonverbal behavior
Without listening, communication becomes
ineffective
Good listening skills tend to establish credibility
and trustworthiness with employees
332
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

333. 333
Ways to Avoid Groupthink in
Small-Group Decision Making
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Source: Irving L. Janis (1972). Victims of Groupthink: a Psychological Study of Foreign-Policy Decisions and
Fiascos. Boston, MS: Houghton-Mifflin.
1.Emphasize to each team member that he or she is a “critical
evaluator” with the responsibility to express opinions and
objections freely
2.Eliminate leadership biases by refusing to express an opinion
when assigning tasks to a group
3.Set up a number of independent groups to work on the same issue
4.Encourage each team member to express the group’s ideas with
someone he or she can trust from outside the group
5.Express the need to examine all alternatives
6.Invite outside experts into group meetings, and allow members to
interact with these experts
7.Assign one person to be “Devil’s advocate”

334. Leader-follower congruence occurs when
leaders and followers share the same vision,
ethical expectations, and objectives for the
company
Leader-exchange theory claims that leaders
form unique relationships with followers
through social interactions
Important for ethical leaders to frequently
communicate and interact with employees
334
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

335. One of the most observable ways of
communicating ethical values to employees
is through codes of ethics and training in
how to act in different situations
Codes of ethics provide important guidelines for
employees on how to act in different situations
Leader-follower communication connects
followers with those in the company who are
most familiar with the firm’s ethical values
335
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

336. Ethical leaders can mitigate power differences
through frequent communication with workers
Organizational politics is often perceived as
trying to achieve one’s own ends even if it means
harming others in the organization
Gossip, manipulation, playing favorites, and taking
credit for another’s work
There is a difference between having a high
degree of office politics and having good political
skills
Political skills can be used to promote organizational
goals and help rather than hinder other employees
336
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

337. Most companies recognize the need for
organizational leaders to provide feedback to
employees
Informal methods like simple conversation or
through more formal systems such as employee
performance evaluations
Need for organizational leaders to get feedback
from their employees
Employee feedback can be generated in many
different ways, including interviews, anonymous
surveys, ethical audits and websites
337
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

338. The most effective ethical leaders possess the
ability to manage themselves and their
relationships with others effectively, a skill
known as emotional intelligence
1.Coercive leader
2.Authoritative leader
3.Affiliative leader
4.Democratic leader
5.Pacesetting leader
6.Coaching leader
338
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

339. Transactional leaders attempt to create
employee satisfaction through negotiating, or
“bartering,” for desired behaviors or levels of
performance
Transformational leaders strive to raise
employees’ level of commitment and foster trust
and motivation
Authentic leaders are passionate about the
company, live out corporate values daily in their
behavior in the workplace, and form long-term
relationships with employees and other
stakeholders
339
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

340. When ethical misconduct or issues arise, the leader
should have plans in place to answer stakeholder
concerns and recover from misconduct
The acronym RADAR is used to describe an ethical
leader’s duty to:
Recognizeethical issues
Avoidmisconduct whenever possible
Detect ethical risk areas
Answerstakeholder concerns when an ethical issue
comes to light
Recoverfrom a misconduct disaster by improving
upon weaknesses in the ethics program
340
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341. 341
The RADAR
Model
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
© Linda Ferrell, 2013

342. 342
Questions to Ask for Discovery
and Assessment Processes
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Adapted from Lynn Brewer, Robert Chandler, and O.C. Ferrell (2006). Managing Risks for Corporate Integrity
(Mason, OH: Thomson), 76–84.
•Does the company have a written code of ethics?
•Have individuals from high-level positions in the organization
been assigned overall responsibilityto oversee compliance with
standards and procedures?
•What are the processes or other means by which ethics are
integrated into any or all manufacturing,marketing, distribution,
electronic commerce, and general corporate strategy decisions?
•Is there a review process wherebylegal, ethical, and business
practice considerations are presented, reviewed, or otherwise
considered by the board of directors?
•What steps has the company taken to communicate its standards,
procedures, and policies to all employees through training
programs or publications that describe company expectations?

343. 343
Questions to Ask for Discovery
and Assessment Processes
© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Adapted from Lynn Brewer, Robert Chandler, and O.C. Ferrell (2006). Managing Risks for Corporate Integrity
(Mason, OH: Thomson), 76–84.
•Has the organization taken reasonable steps to achieve
compliance by utilizing, monitoring, and auditing systems
designed to detect misconduct and by providing a reporting
systemwhereby employees can report without fear of retaliation?
•Is adherence to and implementation of, the code of ethics one of
the standardsby which the corporate culture can be linked
directly to performance measures?
•Has the organization used due care not to delegate substantial
responsibility to individuals that it knows does not have the
ability to implement organization wide risk-reduction processes?
•Have the standards been sufficiently enforced through
appropriate methods, such as discipline of employees who violate
ethical policies?