Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance
()
About this ebook
With the high-profile corporate scandals that have taken place in recent years, corporate ethics are more important to a business than ever before. The failure of ethical leadership in an organization is very destructive-it demoralizes the workforce, breeds public distrust, and ultimately results in organizational decay.
Based on more than two decades of consulting, teaching, and research, Denis Collins's Essentials of Business Ethics is designed with appreciation for your demanding professional obligations, with easy-to-find, at-your-fingertips information. Its nuts-and-bolts presentation provides you with practical "how-to" examples and best practices on every area of managing ethics inside your organization in a handy, concise format.
This brief yet powerful guide presents executives and leaders with timely discussion on:
- Human nature and unethical behavior in organizations
- Determining the ethics of job candidates
- The differences between a Code of Ethics and a Code of Conduct
- The best practices for managing diversity
- Using Management-by-Objectives to establish work goals that encourage ethical behavior
- Performance appraisals that reward ethical behaviors
- Aligning community outreach with the company's mission and assets
- Handling the environmental change process
- How to manage three internal communication mechanisms for employees to report potentially unethical or illegal behaviors: an Ethics & Compliance Office, Ombudsman, and Ethics Hotlines
Providing a five-step ethics job-screen process and an ethical decision-making framework, as well as guidelines for conducting a variety of business ethics workshops, Essentials of Business Ethics is the only guide you will need containing all the relevant facts on business ethics, all in one place.
Related to Essentials of Business Ethics
Titles in the series (19)
Essentials of Capacity Management Rating: 0 out of 5 stars0 ratingsEssentials of Knowledge Management Rating: 0 out of 5 stars0 ratingsEssentials of Patents Rating: 0 out of 5 stars0 ratingsEssentials of Credit, Collections, and Accounts Receivable Rating: 0 out of 5 stars0 ratingsEssentials of Managing Treasury Rating: 5 out of 5 stars5/5Essentials of Balanced Scorecard Rating: 1 out of 5 stars1/5Essentials of Financial Risk Management Rating: 0 out of 5 stars0 ratingsEssentials of Business Process Outsourcing Rating: 0 out of 5 stars0 ratingsEssentials of Sarbanes-Oxley Rating: 0 out of 5 stars0 ratingsEssentials of Venture Capital Rating: 4 out of 5 stars4/5Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance Rating: 0 out of 5 stars0 ratingsEssentials of Corporate Fraud Rating: 0 out of 5 stars0 ratingsEssentials of Corporate Governance Rating: 3 out of 5 stars3/5Essentials of Working Capital Management Rating: 0 out of 5 stars0 ratingsEssentials of Online payment Security and Fraud Prevention Rating: 0 out of 5 stars0 ratingsEssentials of the Dodd-Frank Act Rating: 0 out of 5 stars0 ratingsEssentials of Corporate and Capital Formation Rating: 0 out of 5 stars0 ratingsEssentials of Accounts Payable Rating: 0 out of 5 stars0 ratingsEssentials of Supply Chain Management Rating: 3 out of 5 stars3/5
Related ebooks
Essentials of Corporate and Capital Formation Rating: 0 out of 5 stars0 ratingsEssentials of Sarbanes-Oxley Rating: 0 out of 5 stars0 ratingsEssentials of Financial Risk Management Rating: 0 out of 5 stars0 ratingsInternational Corporate Governance After Sarbanes-Oxley Rating: 0 out of 5 stars0 ratingsManagement Reset: Organizing for Sustainable Effectiveness Rating: 0 out of 5 stars0 ratingsThe What, The Why, The How of Corporate Governance Rating: 0 out of 5 stars0 ratings"Reigning the Boardroom: A Trailblazing Guide to Corporate Governance Success": GoodMan, #1 Rating: 0 out of 5 stars0 ratingsCompliance Manager Complete Self-Assessment Guide Rating: 0 out of 5 stars0 ratingsRisk Management and Compliance Complete Self-Assessment Guide Rating: 0 out of 5 stars0 ratingsInternal Control A Complete Guide - 2021 Edition Rating: 0 out of 5 stars0 ratingsThe Secret to Business Ethics: How to Manage Workplace Fraud Cases and Build Integrity-Based Strategies For Responsible Leadership Rating: 0 out of 5 stars0 ratingsReputation Management Complete Self-Assessment Guide Rating: 0 out of 5 stars0 ratingsAccounting and Finance Policies and Procedures Rating: 4 out of 5 stars4/5A Practical Guide - Management of Risks in Small and Medium-Size Enterprises Rating: 0 out of 5 stars0 ratingsEnterprise Compliance Risk Management: An Essential Toolkit for Banks and Financial Services Rating: 0 out of 5 stars0 ratingsCorporate Governance - Effective Performance Evaluation of the Board Rating: 0 out of 5 stars0 ratingsAudit And Compliance A Complete Guide - 2021 Edition Rating: 0 out of 5 stars0 ratingsGoverning in Scary Times: The Board's Roadmap for Governing Through and Beyond an Emergency Rating: 4 out of 5 stars4/5Essentials of Corporate Fraud Rating: 0 out of 5 stars0 ratingsOnline Recruiting and Selection: Innovations in Talent Acquisition Rating: 0 out of 5 stars0 ratingsCorporate Management, Governance, and Ethics Best Practices Rating: 0 out of 5 stars0 ratingsThe Vest Pocket CPA Rating: 0 out of 5 stars0 ratingsThe Internal Auditing Handbook Rating: 0 out of 5 stars0 ratingsThe Business Ethics Twin-Track: Combining Controls and Culture to Minimise Reputational Risk Rating: 0 out of 5 stars0 ratingsStrategic Risk Management: A Practical Guide to Portfolio Risk Management Rating: 5 out of 5 stars5/5Business Risk Factors: Evaluation and Guidelines for Entrepreneurs Rating: 0 out of 5 stars0 ratingsInternal Controls: Guidance for Private, Government, and Nonprofit Entities Rating: 0 out of 5 stars0 ratingsA Brief History of Socially Responsible Investing Rating: 0 out of 5 stars0 ratings
Business For You
Becoming Bulletproof: Protect Yourself, Read People, Influence Situations, and Live Fearlessly Rating: 4 out of 5 stars4/5Crucial Conversations Tools for Talking When Stakes Are High, Second Edition Rating: 4 out of 5 stars4/5Crucial Conversations: Tools for Talking When Stakes are High, Third Edition Rating: 4 out of 5 stars4/5Law of Connection: Lesson 10 from The 21 Irrefutable Laws of Leadership Rating: 4 out of 5 stars4/5The Five Dysfunctions of a Team: A Leadership Fable, 20th Anniversary Edition Rating: 4 out of 5 stars4/5The Richest Man in Babylon: The most inspiring book on wealth ever written Rating: 5 out of 5 stars5/5Never Split the Difference: Negotiating As If Your Life Depended On It Rating: 4 out of 5 stars4/5Your Next Five Moves: Master the Art of Business Strategy Rating: 5 out of 5 stars5/5On Writing Well, 30th Anniversary Edition: An Informal Guide to Writing Nonfiction Rating: 4 out of 5 stars4/5Summary of J.L. Collins's The Simple Path to Wealth Rating: 5 out of 5 stars5/5Capitalism and Freedom Rating: 4 out of 5 stars4/5Collaborating with the Enemy: How to Work with People You Don't Agree with or Like or Trust Rating: 4 out of 5 stars4/5Confessions of an Economic Hit Man, 3rd Edition Rating: 5 out of 5 stars5/5Just Listen: Discover the Secret to Getting Through to Absolutely Anyone Rating: 4 out of 5 stars4/5Financial Words You Should Know: Over 1,000 Essential Investment, Accounting, Real Estate, and Tax Words Rating: 4 out of 5 stars4/5Emotional Intelligence: Exploring the Most Powerful Intelligence Ever Discovered Rating: 4 out of 5 stars4/5Grant Writing For Dummies Rating: 5 out of 5 stars5/5The Energy Bus: 10 Rules to Fuel Your Life, Work, and Team with Positive Energy Rating: 3 out of 5 stars3/5Robert's Rules Of Order Rating: 5 out of 5 stars5/5The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5Carol Dweck's Mindset The New Psychology of Success: Summary and Analysis Rating: 4 out of 5 stars4/5Nickel and Dimed: On (Not) Getting By in America Rating: 4 out of 5 stars4/5Money. Wealth. Life Insurance. Rating: 5 out of 5 stars5/5The Everything Guide To Being A Paralegal: Winning Secrets to a Successful Career! Rating: 5 out of 5 stars5/5Company Rules: Or Everything I Know About Business I Learned from the CIA Rating: 4 out of 5 stars4/5Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple Rating: 5 out of 5 stars5/5How to Grow Your Small Business: A 6-Step Plan to Help Your Business Take Off Rating: 3 out of 5 stars3/5
Reviews for Essentials of Business Ethics
0 ratings0 reviews
Book preview
Essentials of Business Ethics - Denis Collins
PART 1
Background
CHAPTER 1
Human Nature and Unethical Behavior in Organizations
003After reading this chapter, you will be able to:
• Explain the competitive advantages of creating and maintaining an ethical organization
• Describe some common types of unethical behaviors that occur in all types of organizations—for-profits, nonprofits, educational institutions, and government
• Appreciate that unethical behaviors can occur in all organizational operations
• Understand that unethical behaviors can be very costly to organizations
• Discuss human nature in terms of people being pleasure-seekers who can choose to do good or bad
Businesses, nonprofit organizations, and government agencies significantly improve the quality of life on Earth by providing goods and services that fulfill consumer needs.
Look around. A business built the house you live in, the alarm clock that wakes you up, the bed you sleep in, the clothes you wear, the newspapers you read, the chair you sit in, the food you eat, the music you listen to, and the car you drive to work. Providing goods and services that enrich the quality of life, and employment, are very ethical endeavors.
Ethics should permeate all aspects of organizational operations. Unfortunately, due to human nature and inappropriate management control systems, many organizations are ethically challenged.
This chapter discusses why managing ethics is essential, moral imperfection among human beings, and the nature and negative ramifications of unethical activities within organizations. Almost every decision made every day has ethical ramifications. Managing ethics appropriately leads to superior financial performance.
Daily Occurrence of Ethical Dilemmas
When an organization employs someone, that individual brings to work not only unique job skills, but also his or her ethics. Ethics is the set of principles a person uses to determine whether an action is good or bad. Ethics permeates every stakeholder interaction involving owners, customers, employees, lenders, suppliers, and government officials.
People experience a multitude of ethical dilemmas on a daily basis, beginning with whether to get out of bed or hit the snooze button when the morning alarm goes off. Almost every decision and action a person makes the rest of the day has an impact on other people, beginning with arriving at work on time and ending with unfinished tasks at the end of the day. Each decision and action is subject to ethical analysis.
An action sequence consists of the motivation behind the act, the act itself, and the consequences of the act. An ideal ethical situation is one in which a person has good motives and the act results in good consequences. The most unethical situation is one where a person has bad motives and the act results in bad consequences.
Is it ethical for you to inform a subordinate about next year’s business plan? It depends. If you have permission to share the information and doing so improves the subordinate’s performance, then it is very ethical. However, if sharing the information violates a confidentiality agreement and the subordinate is likely to misuse the information, then it is very unethical.
On the ethics continuum, some situations fall between the two extremes. Sometimes, good motives can generate bad consequences. For instance, trying to help a colleague perform one task might distract the person from meeting an important deadline. Sometimes, bad motives can generate good consequences. Your selfish refusal to support a colleague in need of assistance may result in the colleague obtaining even better support from someone else. When evaluating these less-than-ethically-ideal situations, some people place greater ethical weight on having proper motives, while others place greater weight on achieving favorable consequences.
Without having been trained in philosophy, few managers realize that almost every business decision has ethical ramifications. For instance, in 1985, Ken Lay, chief executive officer (CEO) of the regional Houston Natural Gas (HNG) company, had to decide whether to accept a merger offer from InterNorth, which owned North America’s largest natural gas pipeline (see In the Real World). The ethical implications of this business decision are profound. Lay’s decision would impact all InterNorth and HNG shareholders, all HNG employees and their families, and the cities of Houston, Texas and Omaha, Nebraska.
004IN THE REAL WORLD
Merger Opportunity—1985
In 1985, corporate raider Irwin The Liquidator
Jacobs proposed a hostile takeover of the financially troubled InterNorth, an Omaha, Nebraska firm that operated the largest national gas pipeline in North America. InterNorth’s CEO contacted Ken Lay, the CEO of a regional company called Houston Natural Gas (HNG), about a potential merger. InterNorth proposed purchasing HNG’s $47 stock at $70 a share, for a total price tag of $2.4 billion, much of it borrowed money. Jacob’s hostile takeover of InterNorth would be prevented because, even if he sold all the newly combined company’s corporate assets, Jacobs could not profitably pay off its huge debt.
The merger proposal made strategic sense for the regional HNG. The federal government was in the process of deregulating the energy industry and the combined entity would be a dominant force in the natural gas market. In addition, Lay and other executives could sell their HNG stock options at the premium price being offered by InterNorth.
But there were some potential negative merger ramifications for Lay to consider. The InterNorth/HNG entity would have to manage a daunting $4.3 billion debt. Also, it would be a merger of unequal partners. InterNorth, with $7.5 billion in revenue, was three times larger than HNG. Such a size disparity typically resulted in the smaller firm being taken over by the larger one. Bureaucratic redundancies would be eliminated to achieve cost reductions. Only one CEO would be needed, not two, and corporate control would transfer from Houston to Omaha. DECISION CHOICE. If you were the CEO of HNG, would you:
005 Reject InterNorth’s proposal to protect your job and keep HNG headquartered in Houston?
006 Merge with North America’s largest natural gas pipeline company, although it meant the risk of managing a large debt, relocating corporate headquarters to Nebraska, and losing jobs due to redundancies?
Why?
Competitive Advantages of Ethical Organizations
Ethical organizations consist of ethical employees empowered to operate within a culture of trust. Research findings (and common sense) strongly suggest that, in the long term, ethical organizations financially outperform unethical organizations. Eight competitive advantages of achieving high integrity within a culture of trust appear in Exhibit 1.1.
If you were a job applicant, would you rather work for an ethical or an unethical organization?
An ethical organization attracts high-quality employees and leads to higher levels of employee satisfaction and loyalty. If the pay is similar, job candidates consistently choose the ethical organization rather than the unethical organization. Individuals only choose the unethical organization if pay and benefits are substantially higher. A survey of MBA students found that 94% of them would accept an average of 14% lower pay to work for an organization with a reputation for high ethical standards.¹
EXHIBIT 1.1
007If you were a customer, would you rather purchase products or services from an ethical or unethical organization?
A stellar ethical reputation is priceless marketing and leads to higher levels of customer satisfaction and loyalty. When product price and quality are similar, potential customers consistently choose the ethical organization over the unethical organization. In fact, consumers are willing to pay a modest premium for products and services supplied by an ethical company. They purchase from an unethical organization only if the price is substantially lower.
If you were a supplier, would you rather sell your products and services to an ethical or unethical organization?
An ethical organization attracts high-quality suppliers and increases supplier satisfaction and loyalty. Potential suppliers consistently choose to sell to the ethical organization that pays a fair price rather than the unethical organization. Suppliers depend on customers to pay their bills on time so that they can manage a smooth operation.
If you were an investor, would you rather do business with an ethical or unethical organization?
High-quality investors are attracted to ethical organizations, which leads to higher levels of investor satisfaction and loyalty. If anticipated return-on-investments are similar, potential lenders and investors consistently choose the ethical organization rather than the unethical organization.
If you were a community leader or government official, would you rather interact with an ethical or unethical organization?
Ethical organizations honestly communicate with stakeholders and pay their fair share of taxes. In return, ethical organizations earn the respect of, and gain access to, community leaders and government officials.
Lastly, if you were an employee, customer, supplier, investor, community leader, or government official, would you provide managers of an ethical organization with truthful or deceptive information?
We tend to treat others as they treat us. People who are treated fairly and truthfully tend to reply in a fair and truthful manner. Managers can make better informed decisions when they know that the information supplied by others is trustworthy. The honest flow of ideas and the higher levels of employee loyalty, commitment, and satisfaction result in better quality consumer products and services and reduce the need for employee supervision.
These common sentiments are supported by survey research reported in 2007:²
• 94% of Americans believe it is critical
or important
to work for an ethical company.
• 33% of employees have left a company because they disagreed with its business ethics.
• 70% of Americans have decided not to purchase a company’s product because of its questionable ethics.
• 72% of Americans prefer to buy higher priced products and services from companies with ethical business practices than lower priced products and services from companies with questionable business practices.
008TIPS AND TECHNIQUES
Persuading Employees of the Importance of Being Ethical
Being ethical is the right thing to do, but telling that to someone who is not concerned about ethics, or is considering an unethical act, will likely fall on deaf ears. Instead, build a business case linking ethical behavior to profitability or other financial impacts. That usually gets the person’s attention.
Begin by developing a list of reasons why being ethical is good for your organization’s bottom line. Compelling reasons typically include customer retention, lower costs, higher product quality, and employee morale.
Managing Morally Imperfect People
Organizations are composed of people. The average human being is a very good person. But he or she is not a saint. Everyone has his or her own set of moral challenges to manage, such as greed, anger, envy, lust, and pride. Moral perfection is a moving target, always a few grasps beyond our reach.
The managerial challenge is to coordinate the transformation of inputs into products and services in a way that respects the dignity of owners, employees, customers, suppliers, the host community, and the natural environment. It only takes one unethical or illegal behavior to ruin an organization’s reputation or result in damaging litigation.
Researchers have documented that the average person lies twice a day. That’s actually pretty good when one considers the thousands of statements the average person makes every day. But those two times a day an employee, customer, or supplier are dishonest can be very problematic for organizations.
The dishonesty could be a big lie (e.g., a manager falsely claims that the organization has surpassed revenue targets) or a small one (e.g., a salesperson falsely tells an aggravated customer that the boss is not in the office today). The dishonesty could be a lie of commission (e.g., falsely telling the boss that the work is complete) or one of omission (e.g., not telling the boss anything about the incomplete work).
Due to human nature and the potential negative ramifications of unethical work-related activities on organizational performance, ethics must be managed.
What is the Extent of Unethical Behaviors at Work?
Although people are good most of the time, researchers report a rather high prevalence of unethical behavior at