organizational ethics johnson pdf

Their ethical lapse compounded the trading desk’s legal offenses, and the company ended up suffering losses—including legal costs, increased funding costs, and lost business—estimated at nearly $1 billion. A glossy code of conduct, a high-ranking ethics officer, a training program, an annual ethics audit—these trappings of an ethics program do not necessarily add up to a responsible, law-abiding organization whose espoused values match its actions. The underlying model for this approach is deterrence theory, which envisions people as rational maximizers of self-interest, responsive to the personal costs and benefits of their choices, yet indifferent to the moral legitimacy of those choices. Business and Society: Stakeholders, Ethics, Public Policy 14th Edition. By the same token, exemplary conduct usually reflects an organizational culture and philosophy that is infused with a sense of responsibility. The risk of litigation and liability has increased in the past decade as lawmakers have legislated new civil and criminal offenses, stepped up penalties, and improved support for law enforcement. Managers would be mistaken, however, to regard legal compliance as an adequate means for addressing the full range of ethical issues that arise every day. Some managers do not “walk the talk,” employees complain. Today employees think their number-one objective is to be thought of as decent people doing quality work.”. Consider the sale in some countries of hazardous products without appropriate warnings or the purchase of goods from suppliers who operate inhumane sweat-shops in developing countries. Wetherill Associates, Inc.—a small, privately held supplier of electrical parts to the automotive market—has neither a conventional code of conduct nor a statement of values. 1�B�Y InSpeech management, led by executives with financial services and venture capital backgrounds, measured the company’s worth exclusively in terms of financial success. Acme Corporation was charged and convicted of mail fraud. h�b```�2 �� �� @1V �x`��dz@��A�����:D�YŎ���T�lj�`�;���͛�s7��ҡ$�.�q� ?�ݪ\=�Nx5yh�ع�ܢU�v�^��N�|�V��J��)�Ve� T���Qhq�g�ƅG�+fr.j���*� �;�ջ.��� �i�f @[9::�$�����L ���4#����l ���U��Y3|��@`\������u@�?F�������3;(��zu�R6-������y@Z�4���OY��u)&�g�!���؜�E��` �� The executives were forced to resign, having lost the moral authority to lead. Legal clearance does not certify the absence of ethical problems in the United States either, as a 1991 case at Salomon Brothers illustrates. Unlike a code of conduct, which articulates specific behavioral standards, the statement of vision, purposes, and beliefs lays out in very simple terms the company’s central purpose and core values. In the early 1980s, only two years after joining the company, the CEO found evidence suggesting that the apple juice concentrate, supplied by the company’s vendors for use in Beech-Nut’s “100% pure” apple juice, contained nothing more than sugar water and chemicals. In addition, they deprive their organizations of the benefits available under new federal guidelines for sentencing organizations convicted of wrongdoing. Martin Marietta Corporation, the U.S. aerospace and defense contractor, opted for an integrity-based ethics program in 1985. Shortly after the allegations against Sears became public, CEO Edward Brennan acknowledged management’s responsibility for putting in place compensation and goal-setting systems that “created an environment in which mistakes did occur.” Although the company denied any intent to deceive consumers, senior executives eliminated commissions for service advisers and discontinued sales quotas for specific parts. There was, as one executive put it, a “huge disconnect” between the values of the therapists and clinicians and those of the managers who ran the company. They took management’s performance orientation for indifference to patient care and left the company in droves. By providing an alternative channel for raising such concerns, Martin Marietta is able to take corrective action more quickly and with a lot less pain. But, over time, managers became more adept at explaining and using them as a guide. Still, the company has developed its own training program and takes special care to hire people willing to support right action. The introduction of the vision, purpose, and beliefs met with varied reactions from employees, ranging from cool skepticism to open enthusiasm. The CEO could have destroyed the bogus inventory and withdrawn the juice from grocers’ shelves, but he was under extraordinary pressure to turn the ailing company around. When integrated into the day-to-day operations of an organization, such strategies can help prevent damaging ethical lapses while tapping into powerful human impulses for moral thought and action. More often, they reveal a culture that is insensitive or indifferent to ethical considerations or one that lacks effective organizational systems. Download. The corporate general counsel played a pivotal role in promoting the program, and legal compliance was a critical objective. (See the insert “The Hallmarks of an Effective Integrity Strategy.”). Some managers compare their new ways of thinking about ethics to the way they understand quality. CEO John Foster recognized the need for a common frame of reference and a common language to unify the diverse groups. Managers tell all new recruits that absolute honesty, mutual courtesy, and respect are standard operating procedure. By opening up communications, the company has reduced the time spent on redundant audits. What size fine is a corporation likely to pay if convicted of a crime? They also instituted a system of unannounced shopping audits and made plans to expand the internal monitoring of service. The American Psychological Association's (APA) Ethical Principles of Psychologists and Code of Conduct (hereinafter referred to as the Ethics Code) consists of an Introduction, a Preamble, five General Principles (A-E) and specific Ethical Standards.The Introduction discusses the intent, organization, procedural considerations, and scope of application of the Ethics Code. To support the newly defined values, the company changed its name to NovaCare and introduced a number of structural and operational changes. But in 1988, when the company was called InSpeech, the only sentiment shared was mutual mistrust. Prompted by the prospect of leniency, many companies are rushing to implement compliance-based ethics programs. Senior executives built the company from a series of aggressive acquisitions over a brief period of time to take advantage of the expanding market for therapeutic services. But organizational ethics means more than avoiding illegal practice; and providing employees with a rule book will do little to address the problems underlying unlawful conduct. Barely able to hire 25 new clinicians each month in 1988, the company added 776 in 1990 and 2,546 in 1993. 0 However, an overemphasis on potential sanctions can be superfluous and even counterproductive. One employee remembered thinking the talk about values “much ado about nothing.” Another recalled, “It was really wonderful. Managers must acknowledge their role in shaping organizational ethics and seize this opportunity to create a climate that can strengthen the relationships and reputations on which their companies’ success depends. Organizational Behavior An Evidence-Based Approach. By supporting ethically sound behavior, managers can strengthen the relationships and reputations their companies depend on. Martin Marietta, NovaCare, and Wetherill Associates have implemented and lived with quite different integrity strategies. H�\��n�@���C��L�-!K���|��w ��A�a|��o�4�Gk O�����t����l�_���lN]�N�:ܦƛ�?w}���y��s��$����:�˾? The “Tylenol decision,” then, is best understood not as an isolated incident, the achievement of a lone individual, but as the reflection of an organization’s culture. The consequences of an ethical lapse can be serious and far-reaching. In fact, ethics has everything to do with management. It gave us a goal that everyone aspired to, no matter what their place in the company.” At first, some were baffled about how the vision, purpose, and beliefs were to be used. � ����d�ͷ�ۥ��:bv�J�` Ο4 Deeper in that it cuts to the ethos and operating systems of the organization and its members, their guiding values and patterns of thought and action. NovaCare managers acknowledge and company surveys indicate that there is plenty of room for improvement. Some employees spoke of the “pressure, pressure, pressure” to bring in sales. It also includes a system for disclosing violations of federal procurement law to the government. The two Machiavellis: reputation, flexibility, and ethics 123 Theory M: Machiavellian politics and human nature 131 Machiavelli beneath the surface 135 Follow through 144 5 Women behaving badly 150 Chapter objectives 150 It is different for women 151 Gender effects: the … The ethics office is responsible for responding to questions and concerns from the company’s employees. This paper. The values reorientation also helped the company deal with its most serious problem: turnover among health care providers. The hiring of new corporate personnel with health care backgrounds reinforced the company’s new clinical focus. These sentencing guidelines recognize for the first time the organizational and managerial roots of unlawful conduct and base fines partly on the extent to which companies have taken steps to prevent that misconduct. Such errors of judgment rarely reflect an organizational culture and management philosophy that sets out to harm or deceive. WAI also has a unique approach to competition. But this fear is based on a false dichotomy between holding individual transgressors accountable and holding “the system” accountable. Instead, WAI has a Quality Assurance Manual—a combination of philosophy text, conduct guide, technical manual, and company profile—that describes the company’s commitment to honesty and its guiding principle of right action. If a high ranking official at Acme were found to have been involved, the maximum fine could have been as large as $54,800,000 or four times the loss to Acme customers. Recalling her initial interview, one recruit described her response to being told that lying was not allowed, “What do you mean? Four top-level executives failed to take appropriate action when learning of unlawful activities on the government trading desk. Management may talk of mutual trust when unveiling a compliance plan, but employees often see a warning from on high. Management’s failure to clarify the line between unnecessary service and legitimate preventive maintenance, coupled with consumer ignorance, left employees to chart their own courses through a vast gray area, subject to a wide range of interpretations. They provide a common frame of reference and serve as a unifying force across different functions, lines of business, and employee groups. The company’s inability to retain therapists caused customers to defect and the stock price to languish in an extended slump. Based on the results, an employee task force drafted a proposed vision statement for the company, and another 250 employees suggested revisions. In each case, management has found that the initiative has made important and often unexpected contributions to competitiveness, work environment, and key relationships on which the company depends. Management’s single-minded emphasis on increasing hours of reimbursable care turned clinicians off. endstream endobj startxref Although the ethics program helps Martin Marietta avoid certain types of litigation, it has occasionally led to other kinds of legal action. (See the insert “Corporate Fines Under the Federal Sentencing Guidelines.”). A short summary of this paper. After reviewing the beliefs, the managers abandoned the idea. Then Foster and several senior managers developed a succinct statement of the company’s guiding purpose and fundamental beliefs that could be used as a framework for making decisions and setting goals, policies, and practices. Sumudu Sankalpa. Without active management support for ethical practice and mechanisms to detect and check questionable sales methods and poor work, it is not surprising that some employees may have reacted to contextual forces by resorting to exaggeration, carelessness, or even misrepresentation. Company lawyers found no law obligating the executives to disclose the improprieties. endstream endobj 88 0 obj <>>> endobj 89 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text]/Properties<>>>/Rotate 0/TrimBox[0.0 0.0 612.0 792.0]/Type/Page>> endobj 90 0 obj <>stream WAI doesn’t have a corporate ethics officer who reports to top management, because at WAI, the company’s corporate ethics officer is top management. The ethics network, which tracks the number and types of cases and complaints, has served as an early warning system for poor management, quality and safety defects, racial and gender discrimination, environmental concerns, inaccurate and false records, and personnel grievances regarding salaries, promotions, and layoffs. Under this new set of organizational pressures and incentives, with few options for meeting their sales goals legitimately, some employees’ judgment understandably suffered. Ethics and job skills are considered equally important in determining an individual’s competence and suitability for employment. 117 0 obj <>stream Organizational behavior (OB) or organisational behaviour is the: "study of human behavior in organizational settings, the interface between human behavior and the organization, and the organization itself". In the face of declining revenues, shrinking market share, and an increasingly competitive market for undercar services, Sears management attempted to spur the performance of its auto centers by introducing new goals and incentives for employees. Turnover among its frontline employees—the clinicians and therapists who care for patients in nursing homes and hospitals—escalated to 57% per year. Organizations can quickly become entangled in an all-consuming web of legal proceedings. A version of this article appeared in the. The following example, based on a case studied by the United States Sentencing Commission, shows how the 1991 Federal Sentencing Guidelines have affected overall fine levels and how managers’ actions influence organizational fines. More contractors are adopting group bidding decision-making to reduce the number of incorrect decisions. H$ IF Qe������b``$���8�@� KJ 1 The assumption is that personal commitment and appropriate decision processes will lead to right action. Business and Society: Stakeholders, Ethics, Public Policy 14th Edition. Based on Case No. Executives believe that the reputation they’ve earned through their ethics program has helped them build trust with government auditors, as well. Organizational Behavior An Evidence-Based Approach. The ACM Code of Ethics and Professional Conduct ("the Code") expresses the conscience of the profession. But a recent study reported in Why People Obey the Law by Tom R. Tyler shows that obedience to the law is strongly influenced by a belief in its legitimacy and its moral correctness. The following chart shows a possible range of fines for each situation: What Fine Can Acme Expect? For WAI, the challenge will be to sustain its vision as the company grows and taps into markets overseas. A strategy based on integrity holds organizations to a more robust standard. Those values are so deeply ingrained in the company’s culture and operating systems that they have been largely self-sustaining. Based on Case No. Even in the best cases, legal compliance is unlikely to unleash much moral imagination or commitment. To foster a climate that encourages exemplary behavior, corporations need a comprehensive approach that goes beyond the often punitive legal compliance stance. I lie for a living!” Today she is persuaded that the policy makes sound business sense. Indeed, the more skeptical among them may view compliance programs as nothing more than liability insurance for senior management. Then an ethical framework becomes no longer a burdensome constraint within which companies must operate, but the governing ethos of an organization. To understand all is not to forgive all. And even managers who claim to use the law as a guide to ethical behavior often lack more than a rudimentary understanding of complex legal issues. WAI is known for informing suppliers of overshipments as well as undershipments and for scrupulous honesty in the sale of parts, even when deception cannot be readily detected. Life is a characteristic that distinguishes physical entities that have biological processes, such as signaling and self-sustaining processes, from those that do not, either because such functions have ceased (they have died), or because they never had such functions and are classified as inanimate.Various forms of life exist, such as plants, animals, fungi, protists, archaea, and bacteria. Still, several features are common to efforts that have achieved some success: Success in creating a climate for responsible and ethically sound behavior requires continuing effort and a considerable investment of time and resources. CEO Norman Augustine notes, “Ten years ago, people would have said that there were no ethical issues in business. Many people resist acknowledging the influence of organizational factors on individual behavior—especially on misconduct—for fear of diluting people’s sense of personal moral responsibility. There is no question of the necessity of a sound, well-articulated strategy for legal compliance in an organization. In 1987, the company pleaded guilty to selling adulterated and misbranded juice. I’m a buyer. Other companies emphasize aspirations—values that are ethically desirable but not necessarily morally obligatory—such as good service to customers, a commitment to diversity, and involvement in the community. WAI is a small company founded by 34 people who shared a belief in right action; its ethical values were naturally built into the organization from the start. This report, The State of Ethics & Compliance in the Workplace: A Look at Global Trends, is the result Acknowledging the importance of organizational context in ethics does not imply forgiving individual wrongdoers. During the past decade, a number of companies have undertaken integrity initiatives. Some companies focus on the core values of integrity that reflect basic social obligations, such as respect for the rights of others, honesty, fair dealing, and obedience to the law. She delegates the “technical” aspects of the business—marketing, finance, personnel, operations—to other members of the organization. endstream endobj 91 0 obj <>stream Sears Auto Centers’ and Beech-Nut Nutrition Corporation’s experiences illustrate the role organizations play in shaping individuals’ behavior—and how even sound moral fiber can fray when stretched too thin. The ethics office also works closely with the human resources, legal, audit, communications, and security functions to respond to employee concerns. The company systematically charged customers who damaged rented automobiles more than the actual cost of repairs. : 88-266, United States Sentencing Commission, Supplementary Report on Sentencing Guidelines for Organizations. At NovaCare, executives defined organizational values and introduced structural changes to support those values. READ PAPER. One employee explains, “We are not ‘in competition’ with anybody. Two years and two criminal trials later, the CEO pleaded guilty to ten counts of mislabeling. Above all, organizational ethics is seen as the work of management. People generally feel that they have a strong obligation to obey the law. For example, Johnson & Johnson’s handling of the Tylenol crisis is sometimes attributed to the singular personality of then-CEO James Burke. Marie Bothe, WAI’s chief executive officer, sees her main function as keeping the 350-employee company on the path of right action and looking for opportunities to help the community. Field managers and clinicians were given greater decision-making authority; clinicians were provided with additional resources to assist in the delivery of effective therapy; and a new management structure integrated the various therapies offered by the company. In the end, creating a climate that encourages exemplary conduct may be the best way to discourage damaging misconduct. Artificial incentives, such as sales contests, are never used to spur individual performance. By 1993, turnover had dropped to 27%. No lying? But it was conceived of and implemented from the start as a company-wide management initiative aimed at creating and maintaining a “do-it-right” climate. The company increased minimum work quotas and introduced productivity incentives for mechanics. The law does not generally seek to inspire human excellence or distinction. Equally—if not more—important is the damage an ethical lapse can do to an organization’s reputation and relationships. The total cost of the settlement, including potential customer refunds, was an estimated $60 million. Its network of representatives serves as a sounding board, a source of guidance, and a channel for raising a range of issues, from allegations of wrongdoing to complaints about poor management, unfair supervision, and company policies and practices. As Richard Breeden, former chairman of the Securities and Exchange Commission, noted, “It is not an adequate ethical standard to aspire to get through the day without being indicted.”. Once seen as an upstart beset by naysayers and industry skeptics, WAI is now credited with entering and professionalizing an industry in which kickbacks, bribes, and “gratuities” were commonplace. Contextual forces can also influence the behavior of top management, as a former CEO of Beech-Nut Nutrition Corporation discovered. They vary according to the ethical values focused on and the implementation approaches used. After months of soul-searching, InSpeech executives realized that the turnover rate was a symptom of a more basic problem: the lack of a common set of values and aspirations. While compliance is rooted in avoiding legal sanctions, organizational integrity is based on the concept of self-governance in accordance with a set of guiding principles. In many cases, potentially embarrassing problems have been identified and dealt with before becoming a management crisis, a lawsuit, or a criminal investigation. At NovaCare, clinicians took management’s performance orientation for indifference to patient care and left the company in droves. The ethics program has led to better relationships with the government, as well as to new business opportunities. They consider more carefully how situations will be perceived by others, the possible long-term consequences of short-term thinking, and the need for continuous improvement. Instead, a number of organizational factors contributed to the problematic sales practices. Shortly after establishing the program, the company began its first round of ethics training for the entire workforce, starting with the CEO and senior executives. In 1992, it investigated 684 cases. Acme could have been fined anywhere from 5% to 200% the loss suffered by customers, depending on whether or not it had an effective program to prevent and detect violations of law and on whether or not it reported the crime, cooperated with authorities, and accepted responsibility for the unlawful conduct. Newcomers generally react positively to company philosophy, but not all are prepared for such a radical departure from the practices they have known elsewhere. Form of self-governance but were skeptical that an ethics program are also convinced that the program and! 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