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Ethical Decision-Making Framework Model
Assessment
Summary
Alternatives
Analysis
Application
Action
Notes
Ethical Assessment #1
This exercise was about right and wrong answers. You either
knew the material or you did not
I didn’t do as well as I hoped but that is to be expect given this
is week one of the course
Form the reading it was clear that ethics and business is not as
simple as making right, wrong, good, or bad choices based on
one’s personal belief. The reason this is so is because in
personal life, profit of a company is not a consideration. There
are no shareholders but, in some cases, there are stakeholders
dependent on the decision. being made. But it was clear that
you can’t just be a good person and be an ethical business
leader.
I will need to consider the appropriateness and how to apply my
personal morals and values when making business related
decisions. I hope that we will see a good example of a company
that does this during this course.
Ethical Assessment #2
In the Values Inventory I rated assistance, character, honesty,
integrity, sacrifice, and truthfulness very high as these are
principles that I value in making ethical decisions. My response
was based on not knowing the situation or scenario. An
alternative would have been to rate some of the other areas
high, but I found this difficult because those I selected are
always non-negotiables for me. On the
The pros for the Values Inventory are limited to the fact that I
was comfortable with them because they are what I consider
non-negotiables. The con is that I didn’t give the others
appropriate consideration because I didn’t feel like I had the
information to do so.
Form the reading it was clear that ethics and business is not as
simple as making right, wrong, good, or bad choices based on
one’s personal belief. The reason this is so is because in
personal life, profit of a company is not a consideration. There
are no shareholders but, in some cases, there are stakeholders
dependent on the decision being made. But it was clear that you
can’t just be a good person and be an ethical business leader.
I will need to consider the appropriateness and how to apply my
personal morals and values when making business related
decisions. I hope that we will see a good example of a company
that does this during this course.
Ethical Assessment #3
Moral Philosophy Assessment, I scored 25 overall which was 10
points higher than my classmates. An alternative would have
been to put aside my personal morals and values to elect to
assist a loved one end their life.
The pros for my choices on the Moral Philosophy exercise were
limited to the fact that it aligned with my personal morals and
values. The Con is that I was not willing to consider an
alternative because to do so would have been a significant
departure from my personal beliefs
Form the reading it was clear that ethics and business is not as
simple as making right, wrong, good, or bad choices based on
one’s personal belief. The reason this is so is because in
personal life, profit of a company is not a consideration. There
are no shareholders but, in some cases, there are stakeholders
dependent on the decision being made. But it was clear that you
can’t just be a good person and be an ethical business leader.
I will need to consider the appropriateness and how to apply my
personal morals and values when making business related
decisions. I hope that we will see a good example of a company
that does this during this course.
Week One Summary
See Above
See Above
See above
See above
Week Two Summary
The case study on Mark showcased a good approach to
corporate citizenship while the microchip case study left me
with a sense of uncertainty on how that citizenship should be
applied to the fielding of new technologies. The only
alternative would have been for Mark to not shift his mindset
and engagement to one of sustainment and for the fielding of
the microchip to be mandatory without the proper oversight and
regulatory environment.
The pros of Mark’s decision clearly enabled relationships with
companies like Dow Chemical and create opportunities to look
at their business practices to identify areas of improvement that
would facilitate sustainment. Conversely, if he would not have
made the shift, I am not sure these things wouldn’t have
happened anyways as Mark was doing it for Goldman Sachs
prior to his departure. The pros of fielding new technology and
allowing the oversight and regulatory environment to catch up
after the fact really revolve around convenience and the change
of organizational practices to benefit from their use.
Conversely, this would allow it to be exploited in a way that
could cause irreparable damage
From the reading corporate citizenship is very important and
often will determine a company’s success or failure depending
on their willingness to change as a result of the changing needs
landscape. An article by Donovan McFarlane was important
because it said “By having a social vision, a company becomes
clear about what it needs to do to become an important
corporate citizen and how it will carry out its plan to build an
image and reputation as part of community progress and
growth.”
It was apparent that a solid approach to corporate governance is
required to “keep the wheels turning” but also holds leaders and
workers accountable for unethical conduct. This is interesting
because I did some follow-up research on Mark Tercerk and
found that he stepped down in June 2019 amid complaints about
the culture at the environmental group and his handling of
complaints about gender inequality and discrimination (Colman
2019). In the business world, perceived bad behavior or
inability to resolve ethics-based issues in the organization can
have disastrous consequences.
Week Three Summary
The first alternative had to do with our discussion post and how
to handle a situation that teetered on the edge of ethical
decision making. The situation had to do with relationships that
led to the perception of an advantage. I decided that the issue
wasn’t the relationship and thus would not ban relationships in
the work area. An alternative would be to ban the relationship
in the work area.
The other thing we looked at was peer-reviewed articles
covering a topic related to our reading on the essential Elements
of Ethical Decision-making. I chose an article based on cause-
related marketing and Rawl’s Difference principle. The
alternative to cause-related marketing is to make and sell a
product that only benefits the consumer and turns a profit for
the business. The alternative to Rawls Principle is to not
consider the disadvantages associated with social mobility and
therefore not provide any incentives or programs that help those
in society who are least advantage overcome their status to
become successful
The pros to prohibiting romantic relationships in an
organization are that it creates a necessary separation between
business and personal. The con is that it doesn’t address the
problem. As the problem is why the perception exists on the
advantage in question. That advantage can exist whether there
is a romantic relationship or not.
The pros to not employing cause-related marketing are that it
streamlines the considerations required by the business. In a lot
of ways, they could ignore things like supply chain ethics and
management. The con is that you lose a market sector of
stakeholders who are willing to pay a higher price for a cause-
based product and miss out on the social responsibility
outcomes as well.
The reading made it clear that businesses must institutionalize
ethics in their business practices and make ethical decisions
based on a variety of factors that may not always apply to the
service they hope to provide. For cause-related marketing, the
articles by Hamby & Brinberg as well as Eikenberry illuminated
the benefits of cause-related marketing practices but left me
with the notion that as a consumer I don’t really care about the
social benefits of a product and care more about fit, form, and
function.
For Rawl’s principle, I read an article by Machin that talked
about the complexities associate with the issue of social
mobility. There is no easy solution to this problem and
penalizing those who are successful to benefit those who would
perhaps never be successful seems unfair. In my opinion this is
a combination government and business problem to solve.
I need to be more open minded to the benefits of cause-related
marketing strategies and be less fit, form, and function focused.
While I want a product that meets my needs, I guess I am
willing to pay more if it benefits a cause that I can relate too.
In short it makes me feel like a good human being to do so.
Week Four Summary
There were two case studies this week that focused on Theo
Chocolate and CVS. My thoughts on Theo Chocolate is that it
is admirable that they sell a chocolate bare that doubly benefits
the farmers in the DRC. The alternative would be to sell a
normal chocolate bar or continue to buy the beans from DRC
farmers without the investment to protect the supply chain or
partner with NPOs to benefit the community after the sale. CVS
placed more emphasis on profit, and it cost them. Their many
ethical challenges really resulted from poor oversight and
programs. They eventually turned it around and even decided to
eliminate the sale of tobacco products in their store because its
sale did not align with their core values. The alternative would
be to do like many others and continue to sale it.
The pros of Theo changing would be simplicity of operations
and maximize the profit returned to the company provided they
made a good product if all they did was make a regular priced
chocolate bar. The con would be they would be just like
everyone else and the benefits of their existing CSR practices
would be lost. The pros of simply buying the beans at a higher
cost would be limited additional overhead driven by supply
chain oversight, etc.
For CVS the pros to continue selling tobacco would be the
profits associated with those products. The con would be it
would slow their reputation gains as refusing to sell that
product clearly shows their commitment to their core values and
the changes necessary after so many ethical issues.
This week reading covered a lot of topics related to moral
philosophies and values, the role of culture and relationships,
and developing an effective ethics program. There were several
articles I read to help me understand the impacts of business
practices and their effectiveness on eliciting change based on
their investments. One of those articles was The Effectiveness
of Rural Versus Urban Nonprofit Organizations in the
Democratic Republic of Congo which showcased that there is
limited data to prove that these company’s efforts truly benefit
the cultures they are interacting with.
After this week, I am committed to take a closer look at things
versus jumping to conclusions that a company’s unethical
behavior automatically equals nefarious conduct. While I am
sure there are plenty of examples of where this has occurred,
what is also clear is that complacency can be just as dangerous,
if not more dangerous, than bad behavior.
Week Five Summary
This week was all about managing and controlling ethic
programs. The case study on BP showed how failing to
maintain a functioning ethics program can result in disastrous
consequences that can last for years. I chose to criticism BP for
there action following the 2010 Gulf Coast oil spill because of
how they responded to the crisis and how it continues to affect
other industries today. I could have chosen to applaud their
cleanup efforts and consider the bulk of their actions from a
different perspective but fell short in coming up with a good
reason to do so.
I also looked at the implications of shareholder activism on
influencing corporate decisions and governance.
The only pro to how BP responded is in the fact that the spill
was contained, and practices were implemented to mitigate the
impacts on other industries.
The con list is lengthy beginning with how the CEO of BP
responded say “I wish I had my life back.” Also, of note is
even today fishing and tourism industries are impacted by the
lasting impacts of an event that should have been avoidable.
For shareholder activism the pros were clear. Allowing
shareholders to truly influence the decisions made by
corporations would lead to undeniable accountability for the
practices of those businesses as well as the results of those
practices on stakeholders.
The con to this approach would be the persistence regulatory
that would be required to manage it and the cost associated with
conducting it.
These week’s reading focused on maintaining functioning ethics
programs with heavy emphasis on the various ways a program
can be audited to ensure in stays healthy. During the case study
we were asked a what if question regarding shareholder ability
to influence BP to change its business practices in the future
which would, in leaderships opinion, have significant negative
implications. I read several articles on shareholder activism
and arrived at the conclusion that shareholder activism is an
almost impossible task to accomplish
I think going forward I would want to ensure the businesses I
choose to use employ practices that not only maintain an ethical
climate but also give equal footing to both shareholders as well
as stakeholders affected by a company’s practices.
Week Six Summary
Week Seven Summary
Week Eight Summary
Assessment Make sure you have al lthe facts about the
ethical dillemia
Alternatives Consider your choices
Analysis Identify your decision and tests its validity
Application Apply ethical principles to your decision
Action Make a decision
Chapter 12: Sustainability: Ethical and Social Responsibility
Dimensions Chapter Contents
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
Chapter 12
Sustainability: Ethical and Social Responsibility Dimensions
Chapter Introduction
12-1 Defining Sustainability
12-2 How Sustainability Relates to Ethical Decision Making and
Social Responsibility
12-3 Global Environmental Issues
12-3a Atmospheric
12-3b Water
12-3c Land
12-4 Environmental Legislation
12-4a Environmental Protection Agency (EPA)
12-4b Environmental Regulations
12-5 Alternative Energy Sources
12-5a Wind Power
12-5b Geothermal Power
12-5c Solar Power
12-5d Nuclear Power
12-5e Biofuels
12-5f Hydropower
12-6 Business Response to Sustainability Issues
12-6a Green Marketing
12-6b Greenwashing
12-7 Strategic Implementation of Environmental Responsibility
12-7a Recycling Initiatives
12-7b Stakeholder Assessment
12-7c Risk Analysis
12-7d The Strategic Environmental Audit
12-8 Chapter Review
12-8a Summary
12-8b Important Terms for Review
12-8c Resolving Ethical Business Challenges
12-8d Check Your EQ
Chapter 12: Sustainability: Ethical and Social Responsibility
Dimensions Chapter Contents
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
© 2020 Cengage Learning Inc. All rights reserved. No part of
this work may by reproduced or used in any form or by any
means - graphic,
electronic, or mechanical, or in any other manner - without the
written permission of the copyright holder.
Chapter 11: Ethical Leadership Chapter Introduction
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
Chapter Introduction
clivewa/ Shutterstock.com
Chapter Objectives
Define ethical leadership
Examine requirements for ethical leadership
Realize the benefits that come from effective ethical leadership
Understand how ethical leadership impacts organizational
culture
Learn about the different styles of conflict management
Understand how employees can be empowered to take on
responsibilities in
ethical leadership
Examine leader–follower relationships
Learn about leadership styles and how they influence ethical
leadership
Use the RADAR model to determine how ethical leaders handle
misconduct
situations
An Ethical Dilemma
Stacy, a recently hired employee of a growing local CPA firm
called Dewey,
Cheatume, and Howe, just passed all four parts of the CPA
exam. The University of
Virginia prepped her well for her new job, and the partners had
high expectations for
Stacy because she scored near the top of her graduating class.
As a result, Stacy
was fast tracked and performed at an advanced level on some
jobs. This was due,
in part, to her excellent skill set and also because of heavy firm
turnover at the
senior level.
Because of the long hours and her inexperience, Stacy started to
make simple
errors such as not meeting time budgets. She began working off
the clock because
she did not want management to know she had a hard time
handling the workload.
After a few months, she casually mentioned the extra hours to a
coworker, who told
her working off the clock is considered unethical and the
company has strict policies
against it. Stacy was not only embarrassed but also upset that
the company never
made this known to her—particularly since she knew her
immediate supervisor
knew full well what she was doing. Stacy stopped working off
the clock and began to
work more quickly to get things done in the expected time
frame.
A few weeks ago, Stacy learned her recent work on a tax return
had to be redone;
Stacy mistakenly charged the wrong client for the return. Doug,
one of the partners,
publicly reprimanded her by saying, “Next time it’s coming out
of your pay check.”
Later that same week, as Stacy helped interview a candidate for
one of the open
accounting positions, she accidentally chipped the glass table in
the conference
room. When Doug heard about it, he said, “I hope your personal
insurance covers
the table. You’ll need to speak to the secretary and get this
replaced.”
Over the following months, the firm continued having more
resignations. It became
so problematic that the Senior Board requested a psychologist
interview all staff
members. When Stacy was interviewed, she described the poor
treatment of
employees and unreasonable expectations. Apparently, other
employees had the
same complaint. The resulting report from the consultant
pointed toward numerous
management problems at the company. Shortly thereafter, the
partners responded
in a way the staff did not expect: They took the report
personally. As a result, rumors
began to surface that the firm was going to go up for sale. Still,
the interviews for
staff positions continued. One Monday morning a memo
surfaced stating that all
staff doing interviews for new hires were to “present the firm in
a positive and
favorable manner.” Stacy was one of those staff members doing
the interviews.
Stacy did not know how to portray the firm in a positive manner
when she was so
miserable. She particularly disliked Doug. It seemed to Stacy
that Doug made it his
mission to torment her by criticizing her every move. He
hovered around her desk
and made comments about making sure not to mess up again.
After getting advice from one of her coworkers, Stacy decided
to approach Doug
about his behavior. He did not take it well.
“Look, if you think I’m being too hard on you, then maybe you
should just leave,”
Doug responded. “It’s obvious you are not cut out for this
business.” Doug continued
to berate Stacy for her “shoddy” work until she was close to
tears.
“If you want to make it in this business, honey, you got to
realize when to pick your
fights. Me, I’m not in the habit of losing.” Doug walked off in a
huff.
The next day Stacy was to interview someone for a lower-level
accounting position.
As she walked down the hallway, Doug approached her.
“I hear you’re going to be interviewing a new candidate today.
Just remember, make
this company look good. No whining about your bad work
experience.”
Stacy contained her anger when she entered the room and sat
down in front of the
candidate. She did her best to act professional and stifle her
emotions. The real
dilemma came when the candidate asked about the firm’s
culture and how Stacy
personally liked working there. She swallowed. She did not
know how to sugarcoat
her answer without making it an outright lie.
Questions | Exercises
1. Describe the deficiencies in ethical leadership at Stacy’s
firm.
2. What type of conflict management style does Doug have? Are
there more
constructive ways for him to handle conflicts with employees?
3. Describe the alternatives Stacy has answering the candidate’s
question
and the advantages and disadvantages of each.
Leadership is a basic requirement for developing an ethical
corporate culture and
reinforcing ethical decision making among employees. For this
reason, we devote an entire
chapter to the leadership qualities that support ethical conduct
in business. While it is
important to have a CEO and board of directors committed to
ethical decision making, it is
equally important all employees understand their roles in
becoming ethical leaders. There
are many examples of ethical leadership failures, resulting in
ethical and legal crises that
damage firms. The former CEO of Diamond Foods led the
company on a massive
acquisition spree using debt to finance the purchases. In order
to make its financial
statements look better, the company used improper accounting
methods to artificially inflate
earnings. As a result of this misconduct, Diamonds reputation
suffered and both the
company and the CEO were forced to pay penalties to the
Securities and Exchange
Commission for the fraud. On the other hand, companies such
as IBM, Procter &
Gamble, and Zappos may have minor ethical transgressions;
however, their leadership
keeps them on the right course in responding appropriately and
recovering from ethical
issues. Many companies founded by ethical leaders such as
Milton Hershey, founder of
Hershey Foods, experienced few ethical crises over the years.
This chapter demonstrates the importance of leadership in
creating an ethical culture. We
first provide a definition of ethical leadership and explore its
relationship to ethical decision
making. Next, requirements of ethical leadership are provided,
followed by how ethical
leadership benefits the company. The relationship between
ethical leadership and
organizational culture is examined, as well as ways ethical
leaders can manage conflict.
Managing conflict appropriately identifies potential issues and
reinforces a firm’s ethical
climate. An important part of leadership is the implementation
of employee-centered
leadership. Employee-centered leadership recognizes that while
not everyone will be a
manager, every employee can and should practice leadership
skills to support ethical
decision making. An essential component of employee-centered
leadership is
communication. Without communication all attempts at
maintaining an ethical culture fail.
We describe common ethical leadership styles proven effective
in building an ethical
corporate culture. Finally, we conclude with a model to address
ethical issues and
misconduct disasters. Leaders can use this model to guide the
firm’s ethical culture, detect
ethical risk areas before they become problematic, and develop
methods of recovery if an
unethical decision or disaster occurs.
It should be obvious that ethical companies are not 100 percent
misconduct free. There will
always be employees or managers that push the boundaries of
acceptable conduct as well
as situations not anticipated in ethics, compliance, or risk
assessment programs. Recall the
10-40-40-10 rule in employee conduct; people are motivated by
different values, resulting in
ethical diversity. Additionally, ethics programs can always be
improved, making it important
to periodically audit the program to uncover weaknesses.
Similarly, ethical leaders have
weaknesses and are not free from mistakes, or lapses and blind
spots, in oversight. What
separates them from unethical leaders is how they respond to
ethical issues, interact with
stakeholders, and learn from their mistakes. All managers and
most employees will witness
misconduct at some point in their careers. What is important is
how they respond to it.
Chapter 11: Ethical Leadership Chapter Introduction
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
© 2020 Cengage Learning Inc. All rights reserved. No part of
this work may by reproduced or used in any form or by any
means - graphic,
electronic, or mechanical, or in any other manner - without the
written permission of the copyright holder.
Chapter 11: Ethical Leadership: 11-11 Chapter Review
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
11-11 Chapter Review
11-11a Summary
Leadership is the ability or authority to guide and direct others
toward a goal. Ethical
decisions should be one dimension of leadership. Ethical
leadership has a significant impact
on ethical decision making because leaders have the power to
motivate others and enforce
the organizations norms and policies.
Ethical leadership skills are developed through years of
training, experience, and learning
from other best practices of leadership. Ethical leadership
involves modeling organizational
values, placing what is best for the organization over the
leader’s own interests, training and
developing employees throughout their careers, establishing
reporting mechanisms,
understanding employee values and perceptions, and
recognizing the limits of
organizational rules and values. Ethical leaders have strong
personal characters, a passion
to do what is right, are proactive, consider all stakeholders’
interests, are role models for the
organizations values, are transparent and actively involved in
decision making, and take a
holistic view of the firm’s ethical culture.
There are many benefits to ethical leadership. Ethical leadership
encourages employees to
act in an ethical manner in their daily work environment.
Ethical leadership can also lead to
higher employee satisfaction and employee commitment.
Customers are often willing to pay
higher prices for products from ethical companies. Ethical
leadership can also impact the
long-term market valuation of the firm. Finally, companies that
demonstrate they have strong
ethics programs are more likely to see their fines reduced if
misconduct should occur.
Ethical leaders generally adopt one of two approaches to
leadership: a compliance-based
approach or an integrity-based approach. A compliance
approach is more focused upon
risks, while an integrity approach views ethics more as an
opportunity. Leaders can be
classified as unethical leaders, apathetic leaders, and ethical
leaders. The unethical leader
is usually egocentric and will often do whatever it takes to
achieve personal and
organizational objectives. A small proportion may even be
classified as psychopathic, in
which they have no conscience and little or no empathy toward
others. This type of leader
does not try to learn about best practices for ethics and
compliance. Apathetic leaders are
not necessarily unethical, but they care little for ethics within
the company. Ethical leaders
include ethics at every operational level and stage of the
decision making process.
Ethical leaders are skilled at conflict management. Ethical
business conflicts occur when
there are two or more positions on a decision that conflicts with
organizational goals.
Sometimes ethical conflicts emerge because employees feel
uncomfortable about their own
or their coworkers’ decisions. There are five types of conflict
management styles:
competitive, avoiding, accommodating, compromising, and
collaborating. However, an
ethical leader should be able to adapt his or her style depending
on the situation.
Additionally, ethical leaders are often skilled at recognizing the
conflict management styles
of others and adapting their styles accordingly.
While we tend to focus on top managers when discussing ethical
leadership, ethical
leadership is not limited to managers or supervisors. Employee
empowerment is an
essential component of a values-based organizational culture.
Employees can contribute to
the firm’s ethical culture by reporting questionable activities,
providing suggestions to
improve the firm’s culture, and modeling the firm’s values to
new employees. A firm’s ethical
culture relies not simply on documents such as a code of ethics,
but on how employees
embody the principles of integrity the organization values.
Communication is an important part of ethical leadership. Four
types of communication
include interpersonal communication, small group
communication, nonverbal
communication, and listening. Communication is essential for
reducing leader isolation and
creating leader–follower congruence. Leader–follower
congruence occurs when leaders and
followers share the same vision, ethical expectations, and
objectives for the company. An
important way of communicating ethical values to employees is
through codes of ethics and
training on how to make ethical decisions. Minimizing power
differences and workplace
politics and encouraging feedback from employees are also
ways to create leader–follower
congruence to support an ethical organizational culture.
As teams become increasingly important, particularly in
organizations requiring complex
problem solving, knowing how to manage teams has taken on a
significant role for
organizational leaders. Ethical leaders can increase the
effectiveness of teams by
supporting the team’s ability to make decisions, initiating the
structure of the team, and
assigning tasks if needed. Team members should be trained in
effective team building skills
to help them arrive at more ethical decisions while avoiding
common pitfalls such as
groupthink.
Leadership styles influence many aspects of organizational
behavior, including employees’
acceptance of and adherence to organizational values. The most
effective ethical leaders
possess the ability to manage themselves and their relationships
with others effectively, a
skill known as emotional intelligence. Resonant leaders are
emotionally intelligent leaders
who demonstrate mindfulness of themselves and their own
emotions, a belief that goals can
be met, and a caring attitude toward others within the
organization. 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 to foster trust and motivation. Another
leadership style gaining
attention is authentic leadership. 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.
The RADAR model stands for Recognize, Avoid, Discover,
Answer, and Recover. An ethical
leader can use this model to identify ethical risk areas, respond
to ethical issues, and, if
necessary, help the organization recover from ethical mishaps.
First, an ethical leader must
be able to identify or recognize issues having an ethical
component. Next, the leader should
seek to avoid having the ethical risk areas turn into ethical
disasters by putting systems and
controls in place to limit the opportunity for misconduct.
Discovery involves proactively
uncovering ethical risk areas that could lead to misconduct.
Ethical audits are a good
discovery tool. When an ethical issue or a misconduct disaster
occurs, answering involves
responding to the discovery of an ethical dilemma through
communication both internally
and externally. Finally, recovery involves fixing any
weaknesses in the ethics program and
developing improved ways of detecting misconduct.
Chapter 11: Ethical Leadership: 11-11 Chapter Review
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
© 2020 Cengage Learning Inc. All rights reserved. No part of
this work may by reproduced or used in any form or by any
means - graphic,
electronic, or mechanical, or in any other manner - without the
written permission of the copyright holder.
Chapter 12: Sustainability: Ethical and Social Responsibility
Dimensions: 12-8 Chapter Review
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
12-8 Chapter Review
12-8a Summary
Sustainability from a strategic business perspective is the
potential for the long-term well-
being of the natural environment, including all biological
entities, as well as the mutually
beneficial interactions among nature and individuals,
organizations, and business
strategies. Sustainable development involves meeting the needs
of the present without
compromising the ability of future generations to meet their
own needs. Sustainability
includes the assessment and improvement of business strategies,
economic sectors, work
practices, technologies, and lifestyles while maintaining the
natural environment.
Sustainability falls into the social responsibility domain of
maximizing positive and
minimizing negative impacts on stakeholders.
The protection of air, water, land, biodiversity, and renewable
natural resources emerged as
a major issue in the twentieth century in the face of increasing
evidence that mankind was
putting pressure on the long-term sustainability of these
resources. Global sustainability
topics include atmospheric issues, including air pollution, acid
rain, and global warming;
water issues, including water pollution and water depletion; and
land issues, including land
pollution, waste management, deforestation, urban sprawl,
biodiversity, and genetically
modified organisms. By being proactive in addressing these
issues, companies can reduce
their environmental impact and generate a reputation as an eco-
responsible company.
The most influential regulatory agency that deals with
environmental issues and enforces
environmental legislation in the United States is the
Environmental Protection Agency
(EPA). The EPA was created in 1970 to coordinate
environmental agencies involved in
conducting environmental research, providing assistance in
reducing pollution, and
enforcing the nations’ environmental laws. A significant number
of laws were promulgated to
address both general and specific environmental issues,
including public health, threatened
species, toxic substances, clean air and water, and natural
resources. Some of the most
important environmental laws include the Clean Air Act, the
Endangered Species Act, the
Toxic Substances Control Act, the Clean Water Act, the
Pollution Prevention Act, the Food
Quality Protection Act, and the Energy Policy Act. LEED is a
certification program that
recognizes sustainable building practices and strategies.
Alternative energy sources also
have a major impact on many stakeholders. Some of the major
alternative forms of energy
include wind, geothermal, solar, nuclear, biofuels, and
hydropower.
Better environmental performance can increase revenue in three
ways: through better
access to certain markets, differentiation of products, and the
sale of pollution-control
technology. Good environmental performance also reduces costs
by improving risk
management and stakeholder relationships, reducing the amount
of materials and energy
used, and reducing capital and labor costs.
Green marketing is a strategic process involving stakeholder
assessment to create
meaningful long-term relationships with customers while
maintaining, supporting, and
enhancing the natural environment. However, some companies
desire to obtain the benefits
of green marketing without the investment. Greenwashing
involves misleading a consumer
into thinking a good or service is more environmentally friendly
than it really is. While it
might seem to be helpful to a firm, companies discovered
engaging in greenwashing may
suffer reputational damage.
Businesses have responded to the opportunities and threats
created by environmental
issues with varying levels of commitment. Those firms
proactive in anticipating risks and
environmental issues develop strategic management programs
that view the environment
as an opportunity for advancing organizational interests. Many
organizations engage in
recycling, the reprocessing of materials, especially steel,
aluminum, paper, glass, rubber,
and some plastics, for reuse. Additionally, stakeholder
assessment, risk analysis, and the
strategic environmental audit are important parts of a high-
commitment approach to
environmental issues. Stakeholder assessment is a process that
acknowledges and actively
monitors the environmental concerns of all legitimate
stakeholders. Through risk analysis, it
is possible to assess the environmental risks associated with
business decisions.
Organizations highly committed to environmental responsibility
may conduct an audit of
their efforts using standards such as ISO 14000 and report the
results to all interested
stakeholders.
Chapter 12: Sustainability: Ethical and Social Responsibility
Dimensions: 12-8 Chapter Review
Book Title: Business Ethics: Ethical Decision Making and Cases
Printed By: Kennisha Holloman ([email protected])
© 2019 Cengage Learning, Cengage Learning
© 2020 Cengage Learning Inc. All rights reserved. No part of
this work may by reproduced or used in any form or by any
means - graphic,
electronic, or mechanical, or in any other manner - without the
written permission of the copyright holder.
42
EBS REVIEW
Winter 2004 / Spring 2005
A Discussion of Ethical
Leadership
Mari Kooskora
Estonian Business School
Abstract
Ethics is part of every field of human activity and
gaining increasingly more importance in all soci-
eties. Ethics starts with a person––a real, living,
breathing human being who makes moral and ethi-
cal choices everyday for better or for worse. The
key to building a sound, ethical community is to
consider the character of those people who make
it happen. Ethical people make up an ethical soci-
ety. A person’s knowledge, skills and understand-
ing of ethics are all revealed through the decisions
s/he makes every day and especially through the
way problems and conflict situations are managed.
The decisions leaders have to make as well as their
actions often inf luence the life of individuals, busi-
nesses and even the whole of society. Ethical behav-
iour and ethical leadership form the critical keys
to survival in the future. In this article the author
discusses the need for ethical leadership and intro-
duces different concepts and theories. Research
results from Estonia explicitly show the impor-
tance of this topic. The words of one successful
and well-known corporate leader Mr. Eczacibasi,
noted during an interview with him, also support
these statements.
Key concepts: business activities, business
ethics, moral development, ethical leadership,
moral values
The Influence of the Behaviour and Charac-
ter of Leaders
The need for effective leadership has become one
of the challenges of the 21st Century, and a grow-
ing number of academics and senior managers have
come to recognise the importance of a new lead-
ership paradigm. For Aristotle (1996, 135), ethical
conduct was the conduct of a virtuous person and
none of the virtues are simply given to us by nature
or faith, we therefore neither have nor lack them
for time and eternity. He said that virtue (ethical
conduct) is something that must be learnt and this
involves a long process in which we must exercise
our practical wisdom and sense of responsibility.
Charles Handy wrote in his book ‘The Age of
Unreason’ (1990)––‘People’s careers will not
be linear, but will mix risk and security, short-
term income and long-term gain, and periods of
extended leisure and education with periods of
intense work-centeredness.’ This creates much
confusion and today we see that people’s lives are
more complicated than ever before. Individuals
fulfil many different roles and form organisations
made up of different kinds of members, and certain
select people are supposed to manage and lead the
others. Quite often people find themselves in situ-
ations without understanding what is required of
them or lacking the time for longer reflection and
consideration about their behaviour.
Both the character and behaviour of people in posi-
tions of leadership have a great impact on others.
Max DePree (1993) has stated quite strongly:
‘Leadership is a serious meddling in other people’s
lives’. He places the following three things at the
top of all leaders’ lists: an understanding of the
fiduciary nature of leadership, a broadened defini-
tion of leadership competence and the enlighten-
ment afforded by a moral purpose.
In the modern business world, increasingly more
businessmen are tending to show a deeper interest
in the issues of morality and ethics in business–
–albeit with a confused or distorted understand-
ing of these issues. Often the author has noted that
Estonian leaders confuse ethical behaviour with
altruism, and attitudes in our society presume that
43
EBS REVIEW
Winter 2004 / Spring 2005
a good leader must be tough and has to make hard
decisions without considering others. This has led
people think that consideration of and care for
others––being supportive and involving others––
indicates weakness not strength.
There is much evidence of the growing demand for
businesses to conduct themselves with a greater
regard for moral and ethical considerations (Wer-
hane, 2000; Hoffmann, 1999; Paine, 2003; Trevino
and Nelson, 1999; Hoivik, 2002; Pojman, 2002;
Carroll 2001; Byron, 1999, etc), and today most
writers stress the importance of ethics and ethical
behaviour in leadership activities––chapters on eth-
ical leadership are included in books and textbooks
dealing with leadership and management (Yukl,
2002; Robbins, 2003; Kreitner and Kinicki, 2001;
Certo 2000; Moorhead and Griffin. 1998, etc).
Modern corporations have significantly broadened
their role in the society and this role impacts many
both inside and outside the organisation. Accord-
ing to Paine (2003), in order to survive and thrive,
the modern corporation must be more than a profit
machine. She says that a growing body of evidence
indicates that corporate citizenship, responsibil-
ity and accountability are becoming as vital to the
bottom line as an effective business model. Organi-
sations do not only provide products and services
but also shape the entire field of public politics, the
physical landscape, attitudes, customs and many
other factors.
This has raised public expectations about the right
and ethical behaviour of corporations and in turn
forced much higher requirements upon leaders in
terms of their conduct. To succeed in this environ-
ment, managers need to realise that companies are
increasingly being judged, not just from a technical
or financial point of view, but also from the moral
point of view (Paine 2003a). High quality leader-
ship may be considered the single most important
factor in assuring the behaviour of companies and
therefore it is vital to have the right people in mana-
gerial positions.
Manuel London (1999) has said: ‘The leadership
challenge as we embark on the rough and fast-paced
world of the twenty-first century is to get things
done expeditiously and profitably, and to do so in
a way that shows high integrity, trust and honesty’.
The Relationship between Individual Ethics
and Organisational Ethics
A fundamental problem in business ethics is to
understand how an individual’s ethics are related
to organisational ethics. People do not invent their
ideals in a vacuum, but rather take these from the
moral traditions of society and tailor them to their
own needs. This leads to a need for better and
moral leadership.
According to Ciulla (1995), good leadership refers
not only to competence but also to ethics. Edward
Aronson (2001) finds ethical behaviour a necessary
condition for the establishment of an ethical organi-
sation, but claims this alone is not to sufficient, since
ethical leadership is required. Mendonca (2001) has
stated that true and effective leadership is when a
leader’s behaviour and the fulfilment of his or her
leadership role is consistent with ethical and moral
values. The territory of ethics lies at the heart of
leadership studies and has veins running right
through leadership research (Ciulla, 1995). Chrys-
sides and Kaler (1993) have stated: ‘We inquire not
simply in order to be informed, but to inform our
actions; to provide those actions with a better and
sounder basis than they might otherwise have’.
Leadership ethics refers to the study of ethical
issues related to leadership and the ethics of leader-
ship. According to Bass (1999), the ethics of leader-
ship rests upon three pillars: 1) the moral character
of the leader; 2) the ethical legitimacy of the values
embedded in the leaders vision, articulation, and
program, which followers either embrace or reject;
and 3) the morality of the processes of social ethical
choice and action that leaders and followers engage
in and collectively pursue. Such ethical character-
istics of leadership have been widely acknowledged
(Kanungo and Mendonca, 1996; Trevino, 1986;
Kouzes and Posner, 1990, 1992).
Rost (1991) has said that the leadership process is
ethical if the people in the relationship (the lead-
ers and followers) freely agree that the intended
changes fairly ref lect their mutual purposes. Burns’
(1978) theory of transforming leadership rests on
a set of moral assumptions about the relationship
between leaders and followers. Aronson (2001)
presented both the modes for influencing followers
that are inherent in the directive, transactional and
transformational styles of leadership (described by
Kanungo; Mendonca, 2001) and the major perspec-
44
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Winter 2004 / Spring 2005
tives in business ethics––deontological and teleo-
logical––and finally proposed a conceptual model
that links ethics to leadership.
The difference between the morality of leaders and
everyone else is that the ethical failures and suc-
cesses of leaders are magnified by their role, vis-
ibility, power, and the impact of their actions and
behaviour on others (Ciulla, 2001). The individu-
al’s mental model is a critical factor that influences
his or her ability to make quality decisions, in addi-
tion to creating a framework for the beliefs and
values that ultimately determine his / her ethical
framework (Caldwell et al, 2002). The practice of
leadership is to guide and look after the interests of
people, organisations, countries, or causes and to
put the mission of the organisation or the good of
one’s constituents first––to take the responsibility.
Individuals cannot be responsible for everyone and
everything all of the time.
The degree of responsibility a leader has is a func-
tion of the extent of his or her decision and action
space. There are limitations to the space for free-
dom of action (Enderle, 1987) derived from the
inner personal limits of particular leaders (i.e. the
micro-level). This means that ethical leadership
finds its limits in the conditions set from the out-
side that limit the leader’s decisions and actions.
At the meso-level, the corporations determine,
via their culture, policy and strategies, a bundle
of conditions the leader cannot but accept (given
his or her decision to remain in the corporation).
At the macro-level, many circumstances are
determined by market forces, by law and by other
socio-cultural factors.
According to the results of research into conflict
management (Virovere et al, 2002, Virovere and
Kooskora, 2002) and a separate survey about deci-
sion-making in business situations conducted two
years ago in Estonia, at EBS (Kooskora, 2001), it
was found that students who had practical work
experience and were involved in managerial tasks
at that time, did not feel as free to make decisions
as they would have liked. There were several who
even answered that they knew how they should
make ethical decisions, how they should act accord-
ing to ethical principles, but they also knew that
in real life, in real business situations they would
act differently. They would consider the corporate,
organisational aspects, the characteristics of the
manager-leader, relationships between individuals
and act accordingly. But these decisions no longer
considered ethics and these people didn’t feel free
to make the choices they wanted to.
The leader is responsible for the set of ethics and
norms that govern behaviour in the organisation. It is
up to the leaders to keep the signs of moral purpose
alive and visible. Leaders have to see themselves as
role models, ‘as creators of value in many forms and
for many people. They should not regard profit as
the overarching objective of their endeavours, but as
the result of building strong business relationships
and creating value for others’ (Nash, 1990).
Ethical Leadership and Values
Every person at the managerial level has felt the
temptations and seen that sometimes the rewards
for unethical behaviour are great. Ethical leader-
ship requires discipline, mental and personal disci-
pline that not all leaders are strong enough to keep
to. Some senior executives arrive in their leader-
ship positions with all of the necessary cognitive
and emotional tools to be an active ethical leader.
Part of the reason many of them ascend to senior
leadership positions is because they have a reputa-
tion for integrity, for treating people well and for
doing the right thing. By the time they reach the
executive level, their values are solid, and when
challenged, the leaders hold to them without ques-
tion. On the other hand however, senior executive
positions have a way of challenging values in a way
that they have never been challenged before (Tre-
vino et al, 2000).
To be perceived as an ethical leader, it is not enough
to be just an ethical person. A reputation for ethi-
cal leadership rests upon two essential pillars:
perceptions of you as both a moral person and a
moral manager. The executive, as a moral person,
is characterised in terms of individual traits such
as honesty and integrity. As a moral manager, the
CEO is thought of as the Chief Ethics Officer of
the organisation, creating a strong ethics mes-
sage that gets the attention of the employees and
inf luences their thoughts and behaviour (Trevino
et al, 2000). An executive’s reputation for ethi-
cal leadership must also find ways to focus the
organisation’s attention on ethics and values and
to infuse the organisation with principles that will
guide the actions of all employees.
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Winter 2004 / Spring 2005
Trevino et al (2000) have stated that being a moral
person encompasses who you are, what you do, and
what you decide as well as making sure that others
know about this dimension of you as a person.
Being a moral manager involves being a role model
for ethical conduct, communicating regularly
about ethics and values, and using a reward system
to hold everyone accountable to these values and
standards. Ethical leadership pays dividends in
employee pride, commitment and loyalty––all par-
ticularly important in a full employment economy
in which good companies strive to find and keep
the best people. During an interview with Mr.
Bulent Eczacibasi (2004), he said that the CEOs
function as a role model is extremely important, as
these people are being observed, listened to very
carefully and the small things are especially con-
sidered important.
Values are important guiding principles, which
make us do the things we do and behave the way
we behave. Sometimes, due to the values we hold,
it is much easier to make difficult decisions, but
sometimes we may feel that our personal values
contradict the action we are expected to carry out.
A similar point arose in the interview with Mr.
Eczacibasi (2004), when he stated that he quite
often stressed the values, clear principles and pri-
orities in life that had made his job as a CEO easier
on one hand and more difficult in the other hand
because conditions in the country often rewarded
unethical behaviour.
Regardless of how well leaders get along with
people, they have little credibility without a high
level of leadership competence, they have to be
competent in managing organisations, making
decisions and taking action. Kouzes and Posner
(1992) found three characteristics of leaders that
were most admired by employees: integrity, compe-
tence and leadership. Mr. Bulent Eczacibasi (2004)
said that a CEO has to be tough, but not ruthless,
it is not always possible to win and principles cost
something. He continued by saying that for him the
people-decisions are the most difficult to make. He
added that he never compromised the values of the
corporation, individual rights and justice towards
people. The values he highlighted as being the
most important were: respect for yourself – integ-
rity; respect for the work you do – good school;
respect for other people (human beings) – letting
them participate in decision-making; respect for
human environment and society – helping others
and respect for the natural environment. Respect
for people as a principle is the foundation of ethics.
Mutual respect is central to forming bonds of long-
term commitment and it may also be the way to
forge short-term bonds.
In an organisation, besides commitment, employ-
ers want loyalty and trust from their employees,
but both trust and loyalty are reciprocal concepts.
Ciulla (2000) has noted that it is ironic that the
less stability and loyalty companies have to offer
employees, the more commitment they demand
from them. Good ethical leaders are those who
build trust and loyalty in their organisations. Trust
is important and makes doing business with others
much easier. ‘If you trust a person, you can do
business with a handshake. If you can’t trust some-
one, you have to try to get all the transactions and
agreements down on paper. When there is no trust
in a society or organisation, people substitute rules,
contracts and laws’ (Ciulla, 2000). Robert Solomon
(1998) has observed that without trust, there can be
no betrayal, but more generally, without trust there
can be no cooperation, no community, no com-
merce, no conversation. In short there can be no
interaction, no business at all.
Robert Rogers (1995) has stated that top managers
truly live in glasshouses where people scrutinise
every move and word for their true meaning. The
behaviour of senior leaders is the major thing that
determines if and how the organisation’s values are
admitted. Leaders have to realise that when they
make commitments, following through and keep-
ing them are essential. If they don’t, they have no
one but themselves to blame when their credibility
takes a nosedive. If leaders want to earn and build
trust, they must ‘walk the talk’ and additionally
share their feelings and beliefs so that employees
gain a clear picture of their leader’s values and pri-
orities. Senior leaders must truly lead the way in
creating a culture that reinforces and models open,
honest, straightforward communication.
Ethical Behaviour and Effective Leadership
Ethical behaviour and effective leadership are inter-
twined and inseparable. Meaningful leadership,
leadership that in the long run counts for some-
thing, cannot be accompanied by moral collapse. It
may not be correct to say that ‘the leader who acts
ethically will ultimately succeed’, but reality has
proven that the leader who lacks an ethical foun-
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Winter 2004 / Spring 2005
dation will ultimately fail, maybe not immediately,
but in the long run.
The leader’s role is to create the circumstances
where people can act according to ethical norms
and with their own behaviour they are role models,
they are being watched and followed. Willard C.
Butcher, the retired chairman of the Chase Man-
hattan Corporation, has expressed this idea in the
following manner (1997): ‘Business leaders today
can’t shrink from their obligations to set a moral
example for those they lead. They must draw the
line between, on the one hand, the perpetual push
for higher profits, and on the other, actions antago-
nistic to the values of the larger society … ethical
business leadership requires not only harvesting
the fruit we can pluck today; not only investing in
the small trees and experimental hybrids that won’t
yield a thing in this quarter or the next, but also
caring for the soil that allows us to produce such a
rich harvest in the first place’.
Strong leaders may have clear vision, creativity,
pride and even trust among employees, but these
may not be enough unless being accompanied by
competency, transparency, integrity and humility.
In this case all these positive traits may loose their
value and the organisation may not recognise their
leader as an ethical role model. ‘The final litmus test
is when staff members, regardless of their organi-
sational status, do not hesitate in choosing the hard
right over the easy wrong’ (Hofmann 2004, 41).
Management quality is largely dependent on the
decision-making ability of a manager and also on
the kinds of decisions he or she makes. There is
often an ethical conf lict between making money
and doing what is right. A dilemma must be solved
– whether to perform in the most beneficial way
either to the employer or to one’s own career or to
the customer. The author has had heated discus-
sions with Estonian business leaders, who claim
that the only thing that is important in business is
earning profit, nothing else matters as much. Profit
is definitely an important part of every business
activity, in fact it is critical, because without profit
there cannot be any business and development, but
thinking about earning profit alone is definitely not
enough. Life has shown that leaving ethics behind
will be very expensive and even fatal in business.
While studying conflict situations over the last
five–six years at Estonian Business School (Viro-
vere, Kooskora, 2002) we have witnessed that
managers in Estonia have underestimated the
importance of ethical criteria: that a good, con-
f lict-free working environment encourages people
to work with greater commitment, which in the end
is profitable for the company. We have also seen
that the human aspect in business has not been con-
sidered significant because most conflicts end with
an employee getting fired or leaving their job with-
out ample opportunity to defend him/herself. And
we have observed that managers did not realise that
the loss of an employee is a loss not only for the
employee, but also for the company. We have also
seen that in the end this style of business has turned
into the most ineffective, resulting in severe con-
sequences: conflicts, damaged relationships, failed
businesses and bankruptcies (Kooskora, 2004).
Ethical Leadership and Caring for Others
Leaders who do not look after the interests of their
followers are not only unethical, but ineffective.
The practice of leadership is to guide and look after
the interests of people, organisations, countries
or causes, and to put the mission of the organisa-
tion or the good of one’s constituents first (Ciulla,
2001, 315). Leaders have to be effective and they
have to be ethical. There are times when simply
doing something ethical makes a leader effective
and other times when being very effective makes
a leader ethical.
Our roles in various areas of life––work, family,
politics, etc––are distinct and yet closely connected
with one another because, in spite of the multiplicity
of roles, the subject of the roles remains the same.
Leader’s decisions do not only have technical, eco-
nomic and financial consequences, they also con-
cern employees as individuals (Enderle, 1987).
Being a leader, without developing others is not
enough. Kouzes and Posner (1992) have observed
that when leaders are working at their personal
best, they are also transforming their ‘followers’
into leaders. The best leaders guide their organi-
sations and the people in them to new levels of
learning and performance, transforming the pres-
ent into reaching towards potential. Leadership
thus becomes a process of learning, risking and
changing lives.
Developing others, caring about them, being con-
cerned about their well-being is closely connected
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EBS REVIEW
Winter 2004 / Spring 2005
to love. Kouzes and Posner (1992) state that ‘love
creates the desire to see others grow and become
their best’. While interviewing the successful and
world famous General Stanford they heard him
say: ‘I have the secret to success in life. The secret
is to stay in love. Staying in love gives you the fire
to really ignite other people, to see inside other
people, to have a greater desire to get things done
than the other people. A person who is not in love
doesn’t really feel the kind of excitement that helps
them to get ahead and lead others and to achieve.
I don’t know any other fire, any other thing in life
that is more exhilarating and is more positive a
feeling than love is.’ Ethical leadership accesses the
healing and energising powers of love, recognising
first that leadership is a reciprocal relationship, a
leader’s passion comes from compassion, leaders
ultimately serve and support and honesty is essen-
tial for moral (transformational) leadership.
Conclusion
Ethical questions are essentially questions about
whether people ought or ought not to perform cer-
tain kinds of actions; about whether those actions
are good or bad, right or wrong, virtuous or vicious,
worthy of praise or blame, reward or punishment,
and so on. Consequently, with business ethics as
with any other branch of ethical enquiry, the point
of the exercise is to resolve questions of conduct. It
has, then, an essentially practical purpose. Success
in creating a climate for responsible and ethically
sound behaviour requires continuing effort and a
considerable investment of time and resources.
The leader plays a critical role in establishing and
maintaining the ethical culture within his/her
organisation. Too often the emphasis has been put
primarily on the manager’s expertise, technique,
power, knowledge and strategic choices, at the
expense of the leader’s moral character, but lead-
ership excellence cannot be evaluated without an
assessment of the leader’s character, moral vision,
integrity, values and caring for others and taking
responsibility.
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Ethical Decision-Making Framework ModelAssessmentSumma.docx

  • 1. Ethical Decision-Making Framework Model Assessment Summary Alternatives Analysis Application Action Notes Ethical Assessment #1 This exercise was about right and wrong answers. You either knew the material or you did not I didn’t do as well as I hoped but that is to be expect given this is week one of the course Form the reading it was clear that ethics and business is not as simple as making right, wrong, good, or bad choices based on one’s personal belief. The reason this is so is because in personal life, profit of a company is not a consideration. There are no shareholders but, in some cases, there are stakeholders dependent on the decision. being made. But it was clear that you can’t just be a good person and be an ethical business leader. I will need to consider the appropriateness and how to apply my personal morals and values when making business related decisions. I hope that we will see a good example of a company that does this during this course. Ethical Assessment #2 In the Values Inventory I rated assistance, character, honesty, integrity, sacrifice, and truthfulness very high as these are principles that I value in making ethical decisions. My response
  • 2. was based on not knowing the situation or scenario. An alternative would have been to rate some of the other areas high, but I found this difficult because those I selected are always non-negotiables for me. On the The pros for the Values Inventory are limited to the fact that I was comfortable with them because they are what I consider non-negotiables. The con is that I didn’t give the others appropriate consideration because I didn’t feel like I had the information to do so. Form the reading it was clear that ethics and business is not as simple as making right, wrong, good, or bad choices based on one’s personal belief. The reason this is so is because in personal life, profit of a company is not a consideration. There are no shareholders but, in some cases, there are stakeholders dependent on the decision being made. But it was clear that you can’t just be a good person and be an ethical business leader. I will need to consider the appropriateness and how to apply my personal morals and values when making business related decisions. I hope that we will see a good example of a company that does this during this course. Ethical Assessment #3 Moral Philosophy Assessment, I scored 25 overall which was 10 points higher than my classmates. An alternative would have been to put aside my personal morals and values to elect to assist a loved one end their life. The pros for my choices on the Moral Philosophy exercise were limited to the fact that it aligned with my personal morals and values. The Con is that I was not willing to consider an alternative because to do so would have been a significant departure from my personal beliefs Form the reading it was clear that ethics and business is not as simple as making right, wrong, good, or bad choices based on one’s personal belief. The reason this is so is because in personal life, profit of a company is not a consideration. There
  • 3. are no shareholders but, in some cases, there are stakeholders dependent on the decision being made. But it was clear that you can’t just be a good person and be an ethical business leader. I will need to consider the appropriateness and how to apply my personal morals and values when making business related decisions. I hope that we will see a good example of a company that does this during this course. Week One Summary See Above See Above See above See above Week Two Summary The case study on Mark showcased a good approach to corporate citizenship while the microchip case study left me with a sense of uncertainty on how that citizenship should be applied to the fielding of new technologies. The only alternative would have been for Mark to not shift his mindset and engagement to one of sustainment and for the fielding of the microchip to be mandatory without the proper oversight and regulatory environment. The pros of Mark’s decision clearly enabled relationships with companies like Dow Chemical and create opportunities to look at their business practices to identify areas of improvement that would facilitate sustainment. Conversely, if he would not have made the shift, I am not sure these things wouldn’t have happened anyways as Mark was doing it for Goldman Sachs prior to his departure. The pros of fielding new technology and allowing the oversight and regulatory environment to catch up after the fact really revolve around convenience and the change of organizational practices to benefit from their use. Conversely, this would allow it to be exploited in a way that could cause irreparable damage From the reading corporate citizenship is very important and
  • 4. often will determine a company’s success or failure depending on their willingness to change as a result of the changing needs landscape. An article by Donovan McFarlane was important because it said “By having a social vision, a company becomes clear about what it needs to do to become an important corporate citizen and how it will carry out its plan to build an image and reputation as part of community progress and growth.” It was apparent that a solid approach to corporate governance is required to “keep the wheels turning” but also holds leaders and workers accountable for unethical conduct. This is interesting because I did some follow-up research on Mark Tercerk and found that he stepped down in June 2019 amid complaints about the culture at the environmental group and his handling of complaints about gender inequality and discrimination (Colman 2019). In the business world, perceived bad behavior or inability to resolve ethics-based issues in the organization can have disastrous consequences. Week Three Summary The first alternative had to do with our discussion post and how to handle a situation that teetered on the edge of ethical decision making. The situation had to do with relationships that led to the perception of an advantage. I decided that the issue wasn’t the relationship and thus would not ban relationships in the work area. An alternative would be to ban the relationship in the work area. The other thing we looked at was peer-reviewed articles covering a topic related to our reading on the essential Elements of Ethical Decision-making. I chose an article based on cause- related marketing and Rawl’s Difference principle. The alternative to cause-related marketing is to make and sell a product that only benefits the consumer and turns a profit for the business. The alternative to Rawls Principle is to not consider the disadvantages associated with social mobility and therefore not provide any incentives or programs that help those
  • 5. in society who are least advantage overcome their status to become successful The pros to prohibiting romantic relationships in an organization are that it creates a necessary separation between business and personal. The con is that it doesn’t address the problem. As the problem is why the perception exists on the advantage in question. That advantage can exist whether there is a romantic relationship or not. The pros to not employing cause-related marketing are that it streamlines the considerations required by the business. In a lot of ways, they could ignore things like supply chain ethics and management. The con is that you lose a market sector of stakeholders who are willing to pay a higher price for a cause- based product and miss out on the social responsibility outcomes as well. The reading made it clear that businesses must institutionalize ethics in their business practices and make ethical decisions based on a variety of factors that may not always apply to the service they hope to provide. For cause-related marketing, the articles by Hamby & Brinberg as well as Eikenberry illuminated the benefits of cause-related marketing practices but left me with the notion that as a consumer I don’t really care about the social benefits of a product and care more about fit, form, and function. For Rawl’s principle, I read an article by Machin that talked about the complexities associate with the issue of social mobility. There is no easy solution to this problem and penalizing those who are successful to benefit those who would perhaps never be successful seems unfair. In my opinion this is a combination government and business problem to solve. I need to be more open minded to the benefits of cause-related marketing strategies and be less fit, form, and function focused. While I want a product that meets my needs, I guess I am willing to pay more if it benefits a cause that I can relate too. In short it makes me feel like a good human being to do so.
  • 6. Week Four Summary There were two case studies this week that focused on Theo Chocolate and CVS. My thoughts on Theo Chocolate is that it is admirable that they sell a chocolate bare that doubly benefits the farmers in the DRC. The alternative would be to sell a normal chocolate bar or continue to buy the beans from DRC farmers without the investment to protect the supply chain or partner with NPOs to benefit the community after the sale. CVS placed more emphasis on profit, and it cost them. Their many ethical challenges really resulted from poor oversight and programs. They eventually turned it around and even decided to eliminate the sale of tobacco products in their store because its sale did not align with their core values. The alternative would be to do like many others and continue to sale it. The pros of Theo changing would be simplicity of operations and maximize the profit returned to the company provided they made a good product if all they did was make a regular priced chocolate bar. The con would be they would be just like everyone else and the benefits of their existing CSR practices would be lost. The pros of simply buying the beans at a higher cost would be limited additional overhead driven by supply chain oversight, etc. For CVS the pros to continue selling tobacco would be the profits associated with those products. The con would be it would slow their reputation gains as refusing to sell that product clearly shows their commitment to their core values and the changes necessary after so many ethical issues. This week reading covered a lot of topics related to moral philosophies and values, the role of culture and relationships, and developing an effective ethics program. There were several articles I read to help me understand the impacts of business practices and their effectiveness on eliciting change based on their investments. One of those articles was The Effectiveness of Rural Versus Urban Nonprofit Organizations in the Democratic Republic of Congo which showcased that there is limited data to prove that these company’s efforts truly benefit
  • 7. the cultures they are interacting with. After this week, I am committed to take a closer look at things versus jumping to conclusions that a company’s unethical behavior automatically equals nefarious conduct. While I am sure there are plenty of examples of where this has occurred, what is also clear is that complacency can be just as dangerous, if not more dangerous, than bad behavior. Week Five Summary This week was all about managing and controlling ethic programs. The case study on BP showed how failing to maintain a functioning ethics program can result in disastrous consequences that can last for years. I chose to criticism BP for there action following the 2010 Gulf Coast oil spill because of how they responded to the crisis and how it continues to affect other industries today. I could have chosen to applaud their cleanup efforts and consider the bulk of their actions from a different perspective but fell short in coming up with a good reason to do so. I also looked at the implications of shareholder activism on influencing corporate decisions and governance. The only pro to how BP responded is in the fact that the spill was contained, and practices were implemented to mitigate the impacts on other industries. The con list is lengthy beginning with how the CEO of BP responded say “I wish I had my life back.” Also, of note is even today fishing and tourism industries are impacted by the lasting impacts of an event that should have been avoidable. For shareholder activism the pros were clear. Allowing shareholders to truly influence the decisions made by corporations would lead to undeniable accountability for the practices of those businesses as well as the results of those practices on stakeholders. The con to this approach would be the persistence regulatory that would be required to manage it and the cost associated with conducting it.
  • 8. These week’s reading focused on maintaining functioning ethics programs with heavy emphasis on the various ways a program can be audited to ensure in stays healthy. During the case study we were asked a what if question regarding shareholder ability to influence BP to change its business practices in the future which would, in leaderships opinion, have significant negative implications. I read several articles on shareholder activism and arrived at the conclusion that shareholder activism is an almost impossible task to accomplish I think going forward I would want to ensure the businesses I choose to use employ practices that not only maintain an ethical climate but also give equal footing to both shareholders as well as stakeholders affected by a company’s practices. Week Six Summary Week Seven Summary Week Eight Summary Assessment Make sure you have al lthe facts about the
  • 9. ethical dillemia Alternatives Consider your choices Analysis Identify your decision and tests its validity Application Apply ethical principles to your decision Action Make a decision Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions Chapter Contents Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected])
  • 10. © 2019 Cengage Learning, Cengage Learning Chapter 12 Sustainability: Ethical and Social Responsibility Dimensions Chapter Introduction 12-1 Defining Sustainability 12-2 How Sustainability Relates to Ethical Decision Making and Social Responsibility 12-3 Global Environmental Issues 12-3a Atmospheric 12-3b Water 12-3c Land 12-4 Environmental Legislation 12-4a Environmental Protection Agency (EPA) 12-4b Environmental Regulations 12-5 Alternative Energy Sources 12-5a Wind Power 12-5b Geothermal Power 12-5c Solar Power 12-5d Nuclear Power
  • 11. 12-5e Biofuels 12-5f Hydropower 12-6 Business Response to Sustainability Issues 12-6a Green Marketing 12-6b Greenwashing 12-7 Strategic Implementation of Environmental Responsibility 12-7a Recycling Initiatives 12-7b Stakeholder Assessment 12-7c Risk Analysis 12-7d The Strategic Environmental Audit 12-8 Chapter Review 12-8a Summary 12-8b Important Terms for Review 12-8c Resolving Ethical Business Challenges 12-8d Check Your EQ Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions Chapter Contents Book Title: Business Ethics: Ethical Decision Making and Cases
  • 12. Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning © 2020 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. Chapter 11: Ethical Leadership Chapter Introduction Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning Chapter Introduction clivewa/ Shutterstock.com Chapter Objectives Define ethical leadership Examine requirements for ethical leadership Realize the benefits that come from effective ethical leadership Understand how ethical leadership impacts organizational culture Learn about the different styles of conflict management Understand how employees can be empowered to take on responsibilities in
  • 13. ethical leadership Examine leader–follower relationships Learn about leadership styles and how they influence ethical leadership Use the RADAR model to determine how ethical leaders handle misconduct situations An Ethical Dilemma Stacy, a recently hired employee of a growing local CPA firm called Dewey, Cheatume, and Howe, just passed all four parts of the CPA exam. The University of Virginia prepped her well for her new job, and the partners had high expectations for Stacy because she scored near the top of her graduating class. As a result, Stacy was fast tracked and performed at an advanced level on some jobs. This was due, in part, to her excellent skill set and also because of heavy firm turnover at the senior level.
  • 14. Because of the long hours and her inexperience, Stacy started to make simple errors such as not meeting time budgets. She began working off the clock because she did not want management to know she had a hard time handling the workload. After a few months, she casually mentioned the extra hours to a coworker, who told her working off the clock is considered unethical and the company has strict policies against it. Stacy was not only embarrassed but also upset that the company never made this known to her—particularly since she knew her immediate supervisor knew full well what she was doing. Stacy stopped working off the clock and began to work more quickly to get things done in the expected time frame. A few weeks ago, Stacy learned her recent work on a tax return had to be redone; Stacy mistakenly charged the wrong client for the return. Doug, one of the partners, publicly reprimanded her by saying, “Next time it’s coming out of your pay check.”
  • 15. Later that same week, as Stacy helped interview a candidate for one of the open accounting positions, she accidentally chipped the glass table in the conference room. When Doug heard about it, he said, “I hope your personal insurance covers the table. You’ll need to speak to the secretary and get this replaced.” Over the following months, the firm continued having more resignations. It became so problematic that the Senior Board requested a psychologist interview all staff members. When Stacy was interviewed, she described the poor treatment of employees and unreasonable expectations. Apparently, other employees had the same complaint. The resulting report from the consultant pointed toward numerous management problems at the company. Shortly thereafter, the partners responded in a way the staff did not expect: They took the report personally. As a result, rumors began to surface that the firm was going to go up for sale. Still, the interviews for
  • 16. staff positions continued. One Monday morning a memo surfaced stating that all staff doing interviews for new hires were to “present the firm in a positive and favorable manner.” Stacy was one of those staff members doing the interviews. Stacy did not know how to portray the firm in a positive manner when she was so miserable. She particularly disliked Doug. It seemed to Stacy that Doug made it his mission to torment her by criticizing her every move. He hovered around her desk and made comments about making sure not to mess up again. After getting advice from one of her coworkers, Stacy decided to approach Doug about his behavior. He did not take it well. “Look, if you think I’m being too hard on you, then maybe you should just leave,” Doug responded. “It’s obvious you are not cut out for this business.” Doug continued to berate Stacy for her “shoddy” work until she was close to tears.
  • 17. “If you want to make it in this business, honey, you got to realize when to pick your fights. Me, I’m not in the habit of losing.” Doug walked off in a huff. The next day Stacy was to interview someone for a lower-level accounting position. As she walked down the hallway, Doug approached her. “I hear you’re going to be interviewing a new candidate today. Just remember, make this company look good. No whining about your bad work experience.” Stacy contained her anger when she entered the room and sat down in front of the candidate. She did her best to act professional and stifle her emotions. The real dilemma came when the candidate asked about the firm’s culture and how Stacy personally liked working there. She swallowed. She did not know how to sugarcoat her answer without making it an outright lie. Questions | Exercises 1. Describe the deficiencies in ethical leadership at Stacy’s firm.
  • 18. 2. What type of conflict management style does Doug have? Are there more constructive ways for him to handle conflicts with employees? 3. Describe the alternatives Stacy has answering the candidate’s question and the advantages and disadvantages of each. Leadership is a basic requirement for developing an ethical corporate culture and reinforcing ethical decision making among employees. For this reason, we devote an entire chapter to the leadership qualities that support ethical conduct in business. While it is important to have a CEO and board of directors committed to ethical decision making, it is equally important all employees understand their roles in becoming ethical leaders. There are many examples of ethical leadership failures, resulting in ethical and legal crises that damage firms. The former CEO of Diamond Foods led the company on a massive acquisition spree using debt to finance the purchases. In order to make its financial statements look better, the company used improper accounting
  • 19. methods to artificially inflate earnings. As a result of this misconduct, Diamonds reputation suffered and both the company and the CEO were forced to pay penalties to the Securities and Exchange Commission for the fraud. On the other hand, companies such as IBM, Procter & Gamble, and Zappos may have minor ethical transgressions; however, their leadership keeps them on the right course in responding appropriately and recovering from ethical issues. Many companies founded by ethical leaders such as Milton Hershey, founder of Hershey Foods, experienced few ethical crises over the years. This chapter demonstrates the importance of leadership in creating an ethical culture. We first provide a definition of ethical leadership and explore its relationship to ethical decision making. Next, requirements of ethical leadership are provided, followed by how ethical leadership benefits the company. The relationship between ethical leadership and
  • 20. organizational culture is examined, as well as ways ethical leaders can manage conflict. Managing conflict appropriately identifies potential issues and reinforces a firm’s ethical climate. An important part of leadership is the implementation of employee-centered leadership. Employee-centered leadership recognizes that while not everyone will be a manager, every employee can and should practice leadership skills to support ethical decision making. An essential component of employee-centered leadership is communication. Without communication all attempts at maintaining an ethical culture fail. We describe common ethical leadership styles proven effective in building an ethical corporate culture. Finally, we conclude with a model to address ethical issues and misconduct disasters. Leaders can use this model to guide the firm’s ethical culture, detect ethical risk areas before they become problematic, and develop methods of recovery if an unethical decision or disaster occurs. It should be obvious that ethical companies are not 100 percent
  • 21. misconduct free. There will always be employees or managers that push the boundaries of acceptable conduct as well as situations not anticipated in ethics, compliance, or risk assessment programs. Recall the 10-40-40-10 rule in employee conduct; people are motivated by different values, resulting in ethical diversity. Additionally, ethics programs can always be improved, making it important to periodically audit the program to uncover weaknesses. Similarly, ethical leaders have weaknesses and are not free from mistakes, or lapses and blind spots, in oversight. What separates them from unethical leaders is how they respond to ethical issues, interact with stakeholders, and learn from their mistakes. All managers and most employees will witness misconduct at some point in their careers. What is important is how they respond to it. Chapter 11: Ethical Leadership Chapter Introduction Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning © 2020 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any
  • 22. means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. Chapter 11: Ethical Leadership: 11-11 Chapter Review Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning 11-11 Chapter Review 11-11a Summary Leadership is the ability or authority to guide and direct others toward a goal. Ethical decisions should be one dimension of leadership. Ethical leadership has a significant impact on ethical decision making because leaders have the power to motivate others and enforce the organizations norms and policies. Ethical leadership skills are developed through years of training, experience, and learning from other best practices of leadership. Ethical leadership involves modeling organizational values, placing what is best for the organization over the leader’s own interests, training and
  • 23. developing employees throughout their careers, establishing reporting mechanisms, understanding employee values and perceptions, and recognizing the limits of organizational rules and values. Ethical leaders have strong personal characters, a passion to do what is right, are proactive, consider all stakeholders’ interests, are role models for the organizations values, are transparent and actively involved in decision making, and take a holistic view of the firm’s ethical culture. There are many benefits to ethical leadership. Ethical leadership encourages employees to act in an ethical manner in their daily work environment. Ethical leadership can also lead to higher employee satisfaction and employee commitment. Customers are often willing to pay higher prices for products from ethical companies. Ethical leadership can also impact the long-term market valuation of the firm. Finally, companies that demonstrate they have strong ethics programs are more likely to see their fines reduced if misconduct should occur. Ethical leaders generally adopt one of two approaches to
  • 24. leadership: a compliance-based approach or an integrity-based approach. A compliance approach is more focused upon risks, while an integrity approach views ethics more as an opportunity. Leaders can be classified as unethical leaders, apathetic leaders, and ethical leaders. The unethical leader is usually egocentric and will often do whatever it takes to achieve personal and organizational objectives. A small proportion may even be classified as psychopathic, in which they have no conscience and little or no empathy toward others. This type of leader does not try to learn about best practices for ethics and compliance. Apathetic leaders are not necessarily unethical, but they care little for ethics within the company. Ethical leaders include ethics at every operational level and stage of the decision making process. Ethical leaders are skilled at conflict management. Ethical business conflicts occur when there are two or more positions on a decision that conflicts with organizational goals. Sometimes ethical conflicts emerge because employees feel
  • 25. uncomfortable about their own or their coworkers’ decisions. There are five types of conflict management styles: competitive, avoiding, accommodating, compromising, and collaborating. However, an ethical leader should be able to adapt his or her style depending on the situation. Additionally, ethical leaders are often skilled at recognizing the conflict management styles of others and adapting their styles accordingly. While we tend to focus on top managers when discussing ethical leadership, ethical leadership is not limited to managers or supervisors. Employee empowerment is an essential component of a values-based organizational culture. Employees can contribute to the firm’s ethical culture by reporting questionable activities, providing suggestions to improve the firm’s culture, and modeling the firm’s values to new employees. A firm’s ethical culture relies not simply on documents such as a code of ethics, but on how employees
  • 26. embody the principles of integrity the organization values. Communication is an important part of ethical leadership. Four types of communication include interpersonal communication, small group communication, nonverbal communication, and listening. Communication is essential for reducing leader isolation and creating leader–follower congruence. Leader–follower congruence occurs when leaders and followers share the same vision, ethical expectations, and objectives for the company. An important way of communicating ethical values to employees is through codes of ethics and training on how to make ethical decisions. Minimizing power differences and workplace politics and encouraging feedback from employees are also ways to create leader–follower congruence to support an ethical organizational culture. As teams become increasingly important, particularly in organizations requiring complex problem solving, knowing how to manage teams has taken on a significant role for organizational leaders. Ethical leaders can increase the effectiveness of teams by
  • 27. supporting the team’s ability to make decisions, initiating the structure of the team, and assigning tasks if needed. Team members should be trained in effective team building skills to help them arrive at more ethical decisions while avoiding common pitfalls such as groupthink. Leadership styles influence many aspects of organizational behavior, including employees’ acceptance of and adherence to organizational values. The most effective ethical leaders possess the ability to manage themselves and their relationships with others effectively, a skill known as emotional intelligence. Resonant leaders are emotionally intelligent leaders who demonstrate mindfulness of themselves and their own emotions, a belief that goals can be met, and a caring attitude toward others within the organization. Transactional leaders attempt to create employee satisfaction through negotiating, or “bartering,” for desired behaviors or levels of performance. Transformational leaders strive to raise employees’
  • 28. level of commitment and to foster trust and motivation. Another leadership style gaining attention is authentic leadership. 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. The RADAR model stands for Recognize, Avoid, Discover, Answer, and Recover. An ethical leader can use this model to identify ethical risk areas, respond to ethical issues, and, if necessary, help the organization recover from ethical mishaps. First, an ethical leader must be able to identify or recognize issues having an ethical component. Next, the leader should seek to avoid having the ethical risk areas turn into ethical disasters by putting systems and controls in place to limit the opportunity for misconduct. Discovery involves proactively uncovering ethical risk areas that could lead to misconduct. Ethical audits are a good discovery tool. When an ethical issue or a misconduct disaster occurs, answering involves responding to the discovery of an ethical dilemma through
  • 29. communication both internally and externally. Finally, recovery involves fixing any weaknesses in the ethics program and developing improved ways of detecting misconduct. Chapter 11: Ethical Leadership: 11-11 Chapter Review Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning © 2020 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions: 12-8 Chapter Review Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning 12-8 Chapter Review 12-8a Summary Sustainability from a strategic business perspective is the potential for the long-term well-
  • 30. being of the natural environment, including all biological entities, as well as the mutually beneficial interactions among nature and individuals, organizations, and business strategies. Sustainable development involves meeting the needs of the present without compromising the ability of future generations to meet their own needs. Sustainability includes the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles while maintaining the natural environment. Sustainability falls into the social responsibility domain of maximizing positive and minimizing negative impacts on stakeholders. The protection of air, water, land, biodiversity, and renewable natural resources emerged as a major issue in the twentieth century in the face of increasing evidence that mankind was putting pressure on the long-term sustainability of these resources. Global sustainability topics include atmospheric issues, including air pollution, acid rain, and global warming; water issues, including water pollution and water depletion; and
  • 31. land issues, including land pollution, waste management, deforestation, urban sprawl, biodiversity, and genetically modified organisms. By being proactive in addressing these issues, companies can reduce their environmental impact and generate a reputation as an eco- responsible company. The most influential regulatory agency that deals with environmental issues and enforces environmental legislation in the United States is the Environmental Protection Agency (EPA). The EPA was created in 1970 to coordinate environmental agencies involved in conducting environmental research, providing assistance in reducing pollution, and enforcing the nations’ environmental laws. A significant number of laws were promulgated to address both general and specific environmental issues, including public health, threatened species, toxic substances, clean air and water, and natural resources. Some of the most important environmental laws include the Clean Air Act, the Endangered Species Act, the Toxic Substances Control Act, the Clean Water Act, the
  • 32. Pollution Prevention Act, the Food Quality Protection Act, and the Energy Policy Act. LEED is a certification program that recognizes sustainable building practices and strategies. Alternative energy sources also have a major impact on many stakeholders. Some of the major alternative forms of energy include wind, geothermal, solar, nuclear, biofuels, and hydropower. Better environmental performance can increase revenue in three ways: through better access to certain markets, differentiation of products, and the sale of pollution-control technology. Good environmental performance also reduces costs by improving risk management and stakeholder relationships, reducing the amount of materials and energy used, and reducing capital and labor costs. Green marketing is a strategic process involving stakeholder assessment to create meaningful long-term relationships with customers while maintaining, supporting, and
  • 33. enhancing the natural environment. However, some companies desire to obtain the benefits of green marketing without the investment. Greenwashing involves misleading a consumer into thinking a good or service is more environmentally friendly than it really is. While it might seem to be helpful to a firm, companies discovered engaging in greenwashing may suffer reputational damage. Businesses have responded to the opportunities and threats created by environmental issues with varying levels of commitment. Those firms proactive in anticipating risks and environmental issues develop strategic management programs that view the environment as an opportunity for advancing organizational interests. Many organizations engage in recycling, the reprocessing of materials, especially steel, aluminum, paper, glass, rubber, and some plastics, for reuse. Additionally, stakeholder assessment, risk analysis, and the strategic environmental audit are important parts of a high- commitment approach to environmental issues. Stakeholder assessment is a process that
  • 34. acknowledges and actively monitors the environmental concerns of all legitimate stakeholders. Through risk analysis, it is possible to assess the environmental risks associated with business decisions. Organizations highly committed to environmental responsibility may conduct an audit of their efforts using standards such as ISO 14000 and report the results to all interested stakeholders. Chapter 12: Sustainability: Ethical and Social Responsibility Dimensions: 12-8 Chapter Review Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning © 2020 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. 42 EBS REVIEW Winter 2004 / Spring 2005
  • 35. A Discussion of Ethical Leadership Mari Kooskora Estonian Business School Abstract Ethics is part of every field of human activity and gaining increasingly more importance in all soci- eties. Ethics starts with a person––a real, living, breathing human being who makes moral and ethi- cal choices everyday for better or for worse. The key to building a sound, ethical community is to consider the character of those people who make it happen. Ethical people make up an ethical soci- ety. A person’s knowledge, skills and understand- ing of ethics are all revealed through the decisions s/he makes every day and especially through the way problems and conflict situations are managed. The decisions leaders have to make as well as their actions often inf luence the life of individuals, busi- nesses and even the whole of society. Ethical behav- iour and ethical leadership form the critical keys to survival in the future. In this article the author discusses the need for ethical leadership and intro- duces different concepts and theories. Research results from Estonia explicitly show the impor- tance of this topic. The words of one successful and well-known corporate leader Mr. Eczacibasi, noted during an interview with him, also support these statements. Key concepts: business activities, business ethics, moral development, ethical leadership, moral values
  • 36. The Influence of the Behaviour and Charac- ter of Leaders The need for effective leadership has become one of the challenges of the 21st Century, and a grow- ing number of academics and senior managers have come to recognise the importance of a new lead- ership paradigm. For Aristotle (1996, 135), ethical conduct was the conduct of a virtuous person and none of the virtues are simply given to us by nature or faith, we therefore neither have nor lack them for time and eternity. He said that virtue (ethical conduct) is something that must be learnt and this involves a long process in which we must exercise our practical wisdom and sense of responsibility. Charles Handy wrote in his book ‘The Age of Unreason’ (1990)––‘People’s careers will not be linear, but will mix risk and security, short- term income and long-term gain, and periods of extended leisure and education with periods of intense work-centeredness.’ This creates much confusion and today we see that people’s lives are more complicated than ever before. Individuals fulfil many different roles and form organisations made up of different kinds of members, and certain select people are supposed to manage and lead the others. Quite often people find themselves in situ- ations without understanding what is required of them or lacking the time for longer reflection and consideration about their behaviour. Both the character and behaviour of people in posi- tions of leadership have a great impact on others.
  • 37. Max DePree (1993) has stated quite strongly: ‘Leadership is a serious meddling in other people’s lives’. He places the following three things at the top of all leaders’ lists: an understanding of the fiduciary nature of leadership, a broadened defini- tion of leadership competence and the enlighten- ment afforded by a moral purpose. In the modern business world, increasingly more businessmen are tending to show a deeper interest in the issues of morality and ethics in business– –albeit with a confused or distorted understand- ing of these issues. Often the author has noted that Estonian leaders confuse ethical behaviour with altruism, and attitudes in our society presume that 43 EBS REVIEW Winter 2004 / Spring 2005 a good leader must be tough and has to make hard decisions without considering others. This has led people think that consideration of and care for others––being supportive and involving others–– indicates weakness not strength. There is much evidence of the growing demand for businesses to conduct themselves with a greater regard for moral and ethical considerations (Wer- hane, 2000; Hoffmann, 1999; Paine, 2003; Trevino and Nelson, 1999; Hoivik, 2002; Pojman, 2002; Carroll 2001; Byron, 1999, etc), and today most writers stress the importance of ethics and ethical
  • 38. behaviour in leadership activities––chapters on eth- ical leadership are included in books and textbooks dealing with leadership and management (Yukl, 2002; Robbins, 2003; Kreitner and Kinicki, 2001; Certo 2000; Moorhead and Griffin. 1998, etc). Modern corporations have significantly broadened their role in the society and this role impacts many both inside and outside the organisation. Accord- ing to Paine (2003), in order to survive and thrive, the modern corporation must be more than a profit machine. She says that a growing body of evidence indicates that corporate citizenship, responsibil- ity and accountability are becoming as vital to the bottom line as an effective business model. Organi- sations do not only provide products and services but also shape the entire field of public politics, the physical landscape, attitudes, customs and many other factors. This has raised public expectations about the right and ethical behaviour of corporations and in turn forced much higher requirements upon leaders in terms of their conduct. To succeed in this environ- ment, managers need to realise that companies are increasingly being judged, not just from a technical or financial point of view, but also from the moral point of view (Paine 2003a). High quality leader- ship may be considered the single most important factor in assuring the behaviour of companies and therefore it is vital to have the right people in mana- gerial positions. Manuel London (1999) has said: ‘The leadership challenge as we embark on the rough and fast-paced world of the twenty-first century is to get things
  • 39. done expeditiously and profitably, and to do so in a way that shows high integrity, trust and honesty’. The Relationship between Individual Ethics and Organisational Ethics A fundamental problem in business ethics is to understand how an individual’s ethics are related to organisational ethics. People do not invent their ideals in a vacuum, but rather take these from the moral traditions of society and tailor them to their own needs. This leads to a need for better and moral leadership. According to Ciulla (1995), good leadership refers not only to competence but also to ethics. Edward Aronson (2001) finds ethical behaviour a necessary condition for the establishment of an ethical organi- sation, but claims this alone is not to sufficient, since ethical leadership is required. Mendonca (2001) has stated that true and effective leadership is when a leader’s behaviour and the fulfilment of his or her leadership role is consistent with ethical and moral values. The territory of ethics lies at the heart of leadership studies and has veins running right through leadership research (Ciulla, 1995). Chrys- sides and Kaler (1993) have stated: ‘We inquire not simply in order to be informed, but to inform our actions; to provide those actions with a better and sounder basis than they might otherwise have’. Leadership ethics refers to the study of ethical issues related to leadership and the ethics of leader- ship. According to Bass (1999), the ethics of leader- ship rests upon three pillars: 1) the moral character of the leader; 2) the ethical legitimacy of the values
  • 40. embedded in the leaders vision, articulation, and program, which followers either embrace or reject; and 3) the morality of the processes of social ethical choice and action that leaders and followers engage in and collectively pursue. Such ethical character- istics of leadership have been widely acknowledged (Kanungo and Mendonca, 1996; Trevino, 1986; Kouzes and Posner, 1990, 1992). Rost (1991) has said that the leadership process is ethical if the people in the relationship (the lead- ers and followers) freely agree that the intended changes fairly ref lect their mutual purposes. Burns’ (1978) theory of transforming leadership rests on a set of moral assumptions about the relationship between leaders and followers. Aronson (2001) presented both the modes for influencing followers that are inherent in the directive, transactional and transformational styles of leadership (described by Kanungo; Mendonca, 2001) and the major perspec- 44 EBS REVIEW Winter 2004 / Spring 2005 tives in business ethics––deontological and teleo- logical––and finally proposed a conceptual model that links ethics to leadership. The difference between the morality of leaders and everyone else is that the ethical failures and suc- cesses of leaders are magnified by their role, vis- ibility, power, and the impact of their actions and
  • 41. behaviour on others (Ciulla, 2001). The individu- al’s mental model is a critical factor that influences his or her ability to make quality decisions, in addi- tion to creating a framework for the beliefs and values that ultimately determine his / her ethical framework (Caldwell et al, 2002). The practice of leadership is to guide and look after the interests of people, organisations, countries, or causes and to put the mission of the organisation or the good of one’s constituents first––to take the responsibility. Individuals cannot be responsible for everyone and everything all of the time. The degree of responsibility a leader has is a func- tion of the extent of his or her decision and action space. There are limitations to the space for free- dom of action (Enderle, 1987) derived from the inner personal limits of particular leaders (i.e. the micro-level). This means that ethical leadership finds its limits in the conditions set from the out- side that limit the leader’s decisions and actions. At the meso-level, the corporations determine, via their culture, policy and strategies, a bundle of conditions the leader cannot but accept (given his or her decision to remain in the corporation). At the macro-level, many circumstances are determined by market forces, by law and by other socio-cultural factors. According to the results of research into conflict management (Virovere et al, 2002, Virovere and Kooskora, 2002) and a separate survey about deci- sion-making in business situations conducted two years ago in Estonia, at EBS (Kooskora, 2001), it was found that students who had practical work experience and were involved in managerial tasks
  • 42. at that time, did not feel as free to make decisions as they would have liked. There were several who even answered that they knew how they should make ethical decisions, how they should act accord- ing to ethical principles, but they also knew that in real life, in real business situations they would act differently. They would consider the corporate, organisational aspects, the characteristics of the manager-leader, relationships between individuals and act accordingly. But these decisions no longer considered ethics and these people didn’t feel free to make the choices they wanted to. The leader is responsible for the set of ethics and norms that govern behaviour in the organisation. It is up to the leaders to keep the signs of moral purpose alive and visible. Leaders have to see themselves as role models, ‘as creators of value in many forms and for many people. They should not regard profit as the overarching objective of their endeavours, but as the result of building strong business relationships and creating value for others’ (Nash, 1990). Ethical Leadership and Values Every person at the managerial level has felt the temptations and seen that sometimes the rewards for unethical behaviour are great. Ethical leader- ship requires discipline, mental and personal disci- pline that not all leaders are strong enough to keep to. Some senior executives arrive in their leader- ship positions with all of the necessary cognitive and emotional tools to be an active ethical leader. Part of the reason many of them ascend to senior leadership positions is because they have a reputa-
  • 43. tion for integrity, for treating people well and for doing the right thing. By the time they reach the executive level, their values are solid, and when challenged, the leaders hold to them without ques- tion. On the other hand however, senior executive positions have a way of challenging values in a way that they have never been challenged before (Tre- vino et al, 2000). To be perceived as an ethical leader, it is not enough to be just an ethical person. A reputation for ethi- cal leadership rests upon two essential pillars: perceptions of you as both a moral person and a moral manager. The executive, as a moral person, is characterised in terms of individual traits such as honesty and integrity. As a moral manager, the CEO is thought of as the Chief Ethics Officer of the organisation, creating a strong ethics mes- sage that gets the attention of the employees and inf luences their thoughts and behaviour (Trevino et al, 2000). An executive’s reputation for ethi- cal leadership must also find ways to focus the organisation’s attention on ethics and values and to infuse the organisation with principles that will guide the actions of all employees. 45 EBS REVIEW Winter 2004 / Spring 2005 Trevino et al (2000) have stated that being a moral person encompasses who you are, what you do, and what you decide as well as making sure that others
  • 44. know about this dimension of you as a person. Being a moral manager involves being a role model for ethical conduct, communicating regularly about ethics and values, and using a reward system to hold everyone accountable to these values and standards. Ethical leadership pays dividends in employee pride, commitment and loyalty––all par- ticularly important in a full employment economy in which good companies strive to find and keep the best people. During an interview with Mr. Bulent Eczacibasi (2004), he said that the CEOs function as a role model is extremely important, as these people are being observed, listened to very carefully and the small things are especially con- sidered important. Values are important guiding principles, which make us do the things we do and behave the way we behave. Sometimes, due to the values we hold, it is much easier to make difficult decisions, but sometimes we may feel that our personal values contradict the action we are expected to carry out. A similar point arose in the interview with Mr. Eczacibasi (2004), when he stated that he quite often stressed the values, clear principles and pri- orities in life that had made his job as a CEO easier on one hand and more difficult in the other hand because conditions in the country often rewarded unethical behaviour. Regardless of how well leaders get along with people, they have little credibility without a high level of leadership competence, they have to be competent in managing organisations, making decisions and taking action. Kouzes and Posner (1992) found three characteristics of leaders that
  • 45. were most admired by employees: integrity, compe- tence and leadership. Mr. Bulent Eczacibasi (2004) said that a CEO has to be tough, but not ruthless, it is not always possible to win and principles cost something. He continued by saying that for him the people-decisions are the most difficult to make. He added that he never compromised the values of the corporation, individual rights and justice towards people. The values he highlighted as being the most important were: respect for yourself – integ- rity; respect for the work you do – good school; respect for other people (human beings) – letting them participate in decision-making; respect for human environment and society – helping others and respect for the natural environment. Respect for people as a principle is the foundation of ethics. Mutual respect is central to forming bonds of long- term commitment and it may also be the way to forge short-term bonds. In an organisation, besides commitment, employ- ers want loyalty and trust from their employees, but both trust and loyalty are reciprocal concepts. Ciulla (2000) has noted that it is ironic that the less stability and loyalty companies have to offer employees, the more commitment they demand from them. Good ethical leaders are those who build trust and loyalty in their organisations. Trust is important and makes doing business with others much easier. ‘If you trust a person, you can do business with a handshake. If you can’t trust some- one, you have to try to get all the transactions and agreements down on paper. When there is no trust in a society or organisation, people substitute rules, contracts and laws’ (Ciulla, 2000). Robert Solomon
  • 46. (1998) has observed that without trust, there can be no betrayal, but more generally, without trust there can be no cooperation, no community, no com- merce, no conversation. In short there can be no interaction, no business at all. Robert Rogers (1995) has stated that top managers truly live in glasshouses where people scrutinise every move and word for their true meaning. The behaviour of senior leaders is the major thing that determines if and how the organisation’s values are admitted. Leaders have to realise that when they make commitments, following through and keep- ing them are essential. If they don’t, they have no one but themselves to blame when their credibility takes a nosedive. If leaders want to earn and build trust, they must ‘walk the talk’ and additionally share their feelings and beliefs so that employees gain a clear picture of their leader’s values and pri- orities. Senior leaders must truly lead the way in creating a culture that reinforces and models open, honest, straightforward communication. Ethical Behaviour and Effective Leadership Ethical behaviour and effective leadership are inter- twined and inseparable. Meaningful leadership, leadership that in the long run counts for some- thing, cannot be accompanied by moral collapse. It may not be correct to say that ‘the leader who acts ethically will ultimately succeed’, but reality has proven that the leader who lacks an ethical foun- 46
  • 47. EBS REVIEW Winter 2004 / Spring 2005 dation will ultimately fail, maybe not immediately, but in the long run. The leader’s role is to create the circumstances where people can act according to ethical norms and with their own behaviour they are role models, they are being watched and followed. Willard C. Butcher, the retired chairman of the Chase Man- hattan Corporation, has expressed this idea in the following manner (1997): ‘Business leaders today can’t shrink from their obligations to set a moral example for those they lead. They must draw the line between, on the one hand, the perpetual push for higher profits, and on the other, actions antago- nistic to the values of the larger society … ethical business leadership requires not only harvesting the fruit we can pluck today; not only investing in the small trees and experimental hybrids that won’t yield a thing in this quarter or the next, but also caring for the soil that allows us to produce such a rich harvest in the first place’. Strong leaders may have clear vision, creativity, pride and even trust among employees, but these may not be enough unless being accompanied by competency, transparency, integrity and humility. In this case all these positive traits may loose their value and the organisation may not recognise their leader as an ethical role model. ‘The final litmus test is when staff members, regardless of their organi- sational status, do not hesitate in choosing the hard right over the easy wrong’ (Hofmann 2004, 41).
  • 48. Management quality is largely dependent on the decision-making ability of a manager and also on the kinds of decisions he or she makes. There is often an ethical conf lict between making money and doing what is right. A dilemma must be solved – whether to perform in the most beneficial way either to the employer or to one’s own career or to the customer. The author has had heated discus- sions with Estonian business leaders, who claim that the only thing that is important in business is earning profit, nothing else matters as much. Profit is definitely an important part of every business activity, in fact it is critical, because without profit there cannot be any business and development, but thinking about earning profit alone is definitely not enough. Life has shown that leaving ethics behind will be very expensive and even fatal in business. While studying conflict situations over the last five–six years at Estonian Business School (Viro- vere, Kooskora, 2002) we have witnessed that managers in Estonia have underestimated the importance of ethical criteria: that a good, con- f lict-free working environment encourages people to work with greater commitment, which in the end is profitable for the company. We have also seen that the human aspect in business has not been con- sidered significant because most conflicts end with an employee getting fired or leaving their job with- out ample opportunity to defend him/herself. And we have observed that managers did not realise that the loss of an employee is a loss not only for the employee, but also for the company. We have also seen that in the end this style of business has turned
  • 49. into the most ineffective, resulting in severe con- sequences: conflicts, damaged relationships, failed businesses and bankruptcies (Kooskora, 2004). Ethical Leadership and Caring for Others Leaders who do not look after the interests of their followers are not only unethical, but ineffective. The practice of leadership is to guide and look after the interests of people, organisations, countries or causes, and to put the mission of the organisa- tion or the good of one’s constituents first (Ciulla, 2001, 315). Leaders have to be effective and they have to be ethical. There are times when simply doing something ethical makes a leader effective and other times when being very effective makes a leader ethical. Our roles in various areas of life––work, family, politics, etc––are distinct and yet closely connected with one another because, in spite of the multiplicity of roles, the subject of the roles remains the same. Leader’s decisions do not only have technical, eco- nomic and financial consequences, they also con- cern employees as individuals (Enderle, 1987). Being a leader, without developing others is not enough. Kouzes and Posner (1992) have observed that when leaders are working at their personal best, they are also transforming their ‘followers’ into leaders. The best leaders guide their organi- sations and the people in them to new levels of learning and performance, transforming the pres- ent into reaching towards potential. Leadership thus becomes a process of learning, risking and changing lives.
  • 50. Developing others, caring about them, being con- cerned about their well-being is closely connected 47 EBS REVIEW Winter 2004 / Spring 2005 to love. Kouzes and Posner (1992) state that ‘love creates the desire to see others grow and become their best’. While interviewing the successful and world famous General Stanford they heard him say: ‘I have the secret to success in life. The secret is to stay in love. Staying in love gives you the fire to really ignite other people, to see inside other people, to have a greater desire to get things done than the other people. A person who is not in love doesn’t really feel the kind of excitement that helps them to get ahead and lead others and to achieve. I don’t know any other fire, any other thing in life that is more exhilarating and is more positive a feeling than love is.’ Ethical leadership accesses the healing and energising powers of love, recognising first that leadership is a reciprocal relationship, a leader’s passion comes from compassion, leaders ultimately serve and support and honesty is essen- tial for moral (transformational) leadership. Conclusion Ethical questions are essentially questions about whether people ought or ought not to perform cer- tain kinds of actions; about whether those actions
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