Topic 11 Ethics, Leadership and Culture
Topic 11 Ethics, Leadership and Culture
Overview
In the wake of the corporate scandals and other ethical failings, many organisations have faced calls to become more ethical. Increasingly, stakeholders are looking for organisations to demonstrate strong ethical and social values alongside operational and financial performance. To achieve this, a number of organisational writers profess leadership and organisational culture as key components. This topic discusses the role of leadership and organisational culture in promoting ethical behaviour.
Learning objectives
At the conclusion of this topic, you should be able to:
Define the term corporate culture' and understand the relationship to ethical culture
Define the term ethical culture and understand the key dimensions found to influence ethical and unethical behaviour
Understand the term ethical leadership and the qualities of an ethical leader
Understand what can be done at the organisation level to encourage ethical behaviour
Understand how ethical behaviour does not have to conflict with economic performance
What to do this week
Work through the following resources and activities to learn this week's key concepts.
Topic 11 Ethics, Leadership and Culture
https://lms.latrobe.edu.au/mod/book/view.php?id=6986973Forum: Ethical Company
https://lms.latrobe.edu.au/mod/forum/view.php?id=6986974Topic 11 Lecture Notes
https://lms.latrobe.edu.au/mod/resource/view.php?id=6986975Table of Contents
IntroductionCorporate cultureEthical CultureEthical leadershipPersonal and leader moralityEthical leadership behaviourInstitutionalising ethics within corporationsBeyond the bottom lineSummaryForum ActivityAdditional ReadingsTopic 11 Ethics, Leadership and Culture
Introduction
Transcript
Welcome to topic 11 ethics, leadership and culture. We are almost at the end of the subject, so, lets go a quick trip back down memory lane - in topic 9 we looked at how management style, policies and procedures, and job design all contribute to shaping the ethical culture in the workplace, for better or worse. But how does one maintain an ethical culture and what is the relationship to corporate culture? We attempt to answer this question by understanding the key dimensions found to influence ethical and unethical behaviour. It would be a good time to read up on the Jenkins Report into parliaments workplace culture Ive provided the link under additional readings. We briefly touched on it in topic 9 and we will pick up where we left off and dive a little deeper. What makes this report so important? Well, first, it was the first independent review to examine parliamentary workplaces, with a focus on discrimination and bullying and secondly, it provided employees with a voice something that was lacking or non-existent.
Id like you to focus on this report because it shows the important role leaders play in shaping organisational culture, but more importantly for those at the very top, what impact they have in setting the standard. Its quite a damning report, highlighting a culture of bullying, intimidation, harassment, and cover-up. So, what are the drivers behind this behaviour? Has this been going on for some time and why has it only now just come out? A critical part of the report looks at the drivers which contribute to misconduct in parliamentary workplaces. Participants also described risk factors which interact with these drivers to endanger their workplaces.
The drivers include:
power imbalances, where participants described a focus on the pursuit and exercise of power as well as insecure employment and high levels of power and discretion in relation to employment
gender inequality, including a lack of women in senior roles
lack of accountability, including limited recourse for those who experience misconduct
entitlement and exclusion, or a male, stale and pale monopoly on power in [the] building
The risk factors include:
unclear standards of behaviour, leading to confusion about the standards that apply a leadership deficit, such as a prioritisation of political gain over people management
workplace dynamics, a win at all costs and high-pressure and high-stakes environment social conditions of work, including significant alcohol use and a work hard, play hard culture.
employment structures and systems, such as a lack of transparent and merit-based recruitment.
As you will most likely see from the Jenkins report, ethical culture doesnt necessarily translate to insider trading, bribes or corruption. The ethical culture in the organisation is the capacity and conditions that encourage ethical behaviours among the employees.
If the leaders and managers are not setting the right tone then how can we expect our employees to be uphold strong ethical and moral values? This is why leadership is so important in shaping the right culture in an organisation. Michael Josephine, president of the Josephson Institute for Advancement of Ethics sums this up nicely by stating, what we will achieve as executives and leaders will be shaped far more by the collection of dispositions, habits and attitudes that make up our character than by our education or skills. In other words, the organisation is shaped by the leader, not by the individual characteristics of the employees.
So, what, then, is ethical leadership and how does this fit into the general body of leadership literature? Shouldnt any theory of leadership be about ethical leadership and what is required to term a leader ethical? We attempt to answer this moral dilemma facing our leaders. This topic will help you understand ethical leadership, how it contributes to a strong ethical culture and what can be done to encourage ethical behaviour.
With the Jenkins report as a case study, you can see the impact leadership has on an organisation and what steps you can take to create and sustain an ethical workforce.
Overview
In the wake of corporate scandals and others ethical failings, many organisations have faced calls to become more ethical. Increasingly, stakeholders are looking for organisations to demonstrate strong ethical and social values alongside operational and financial performance. To achieve this, a number of organisational writers profess leadership and organisational culture as key components. This topic discusses the role of leadership and organisational culture in promoting ethical behaviour.
Learning Objectives
At the conclusion of this topic, you should be able to:
Define the term 'corporate culture' and understand its relationship to 'ethical culture'
Define the term 'ethical culture' and understand the key dimensions found to influence ethical and unethical behaviour
Understand the term 'ethical leadership' and the qualities of an ethical leader
Understand what can be done at the organisational level to encourage ethical behaviour
Understand how ethical behaviour does not have to conflict with economic performance
Corporate culture
Over the past two decades, organisational theorists and writers on business management have increasingly emphasised corporate culture as the factor that makes one company succeed while another languishes. Corporate culture is a general constellation of beliefs, morales, customs, value systems, and behavioural norms, and way of doing business that are unique to each corporation, that set a pattern for corporate activities and actions, and that describe the implicit and emergent patterns of behaviour and emotions characterising life in the organisation.
Watch
Watch the following video taken from the Banking Royal Commission, interviewing senior management from the big 4 banks. After watching the video, do you think management were ignorant in what was happening within their organisation? Or do you think, based on their responses to the questions, they helped shape the culture within?
Banking bosses at royal commission: the most galling and maddening moments (youtube.com)Corporate culture can be thought of as having different levels of and of being formal or informal. Levels of corporate culture include the following:
Artefacts: the visible level of culture
Espoused beliefs and values: the beliefs and values that guide behaviour and decisions
Underlying assumptions: the taken-for-granted beliefs and values that make up a persons thought world
Each level influences the other, and therefore culture is neither static nor easily changed. An important task of leaders is to create and manage culture and reward desired behaviour. Overlooking or ignoring behaviour that contradicts the desired norms can have the effect of encouraging or even rewarding it. Corporate culture may not always condone unethical behaviour, but sometimes the norms and values of the organisation may ignore or fail to prevent it from occurring. We have seen this with the big 4 banks in Australia, but also the scandal that consumed Volkswagen, better known as diesel gate, whereby the company deliberately sabotaged the emissions tests so their cars looked more environmentally friendly. You can read more on the VW scandal in the article"Dieselgate" - a timeline of the car emissions fraud scandal in Germany.
When trying to understand the dynamics of the company, management need to ask: How do people get ahead in the company? In other words, what rewards system is in place and on what ground are people promoted?
Ethical Culture
The idea that corporations have a culture that can (and should) be managed is a popular one among organisational writers. A corporations ethical culture is one of two concepts that represent the overall context of the company as perceived by employees:
Ethical climate: aspects that stimulate ethical conduct
Ethical culture: the organisational conditions that encourage ethical behaviours
Research by Muel Kaptein indicates that ethical culture is of greater significance than ethical climate in explaining unethical behaviour. What implications does it have on the managers? Managers must understand their organisations ethical culture before they try to address concerns about ethical behaviour. Kaptein identified five dimensions of organisational culture that have found to influence ethical and unethical behaviour.
Kalstein also highlighted the importance of employee perceptions, ethical behaviour must not only be done, it must be seen to be done.
Ethical leadership
So what, then, is ethical leadership and how does this fit into the general body of leadership literature? Shouldnt any theory of leadership be about ethical leadership and what is the required to term a leader ethical? There is a pronounced moral dimension in many current leadership theories, according to Brown, Trevino and Harrison, ethical leadership the demonstration of normatively appropriate conduct though personal actions and interpersonal relationships, and the promotion of such conduct to followers though two-way communication, reinforcement and decision-making (Brown, Trevio & Harrison, 2005). An ethical leader, therefore, acts proactively towards influencing followers ethical and unethical behaviour.
The most critical element of ethical leadership is reputation: it is not sufficient for leaders to claim they are ethical; they must establish this reputation though the perceptions of their employees in order to achieve a desired outcome.
Watch
Think about a time when you were at work and you did something unethical, simply because you looked up and saw your manager doing it? If not at work, what about at home? The following video highlights the impact leaders can have on their subordinates.
Ethical Leadership, Part 1: Perilous at the Top | Concepts Unwrapped (youtube.com)Transcript
What does it mean to be an effective ethical leader? It means at least two things. First, effective ethical leaders act ethically as an inspiration to others. No single factor has a bigger impact on the ethicality of firm culture than the personal examples set by firm leaders. Second, they communicate and manage their organizations culture so as to promote ethical action by subordinates.
Professors Cropanzano and Walumbwa have observed that most adults do not have an adequate moral compass and therefore look outside themselves for guidance in moral dilemma situations. It is the leaders of their organizations to whom they primarily look, and studies show that few things impact the ethical climate of a firm more than the actions of their leaders. Importantly, leaders unethical actions are copied by subordinates even more readily than their ethical actions.
Although it is especially important for leaders to act ethically, they are often particularly vulnerable to acting unethically. Professors Tenbrunsel and Bazerman note that it is clear that most people have high opinions of their own character and do not realize the substantial gap between how ethical they think they are and how ethical they truly are.
Believing that we are moral people and will automatically do moral things, many of us act with little self-reflection and thereby often make ethical mistakes. Overconfidence renders leaders particularly vulnerable because they have typically had great success in their lives. Think of Ken Lay, former CEO of Enron ministers son, noted philanthropist convicted felon. Or, think of disgraced lobbyist Jack Abramoff devout Jew, devoted family man convicted felon.
Another behavioural factor that particularly affects leaders is the instant entitlement bias. Studies show that if people are told that they are part of a team and that they should divide up resources allocated to the team, they tend to divide the resources equally among team members. But if they are told that they have been selected as the leader of the team, they tend to keep a much larger share of the resources for themselves. In real life, leaders often fall victim to the instant entitlement bias, as can be seen in the lavish lifestyles often lived by corporate bigwigs. Think of former Tyco CEO Dennis Kozlowski, who spent $2 million of company money on his wifes birthday party.
A study by Professors Flynn and Wiltermuth demonstrated that people at the center of social networks, such as CEOs, are more likely than others to mistakenly believe that other people agree with them regarding what is an ethical course of action.
It is often shocking how top corporate officers (like WorldComs Bernie Ebbers) and high government officials (like New Yorks Eliot Spitzer) come to the view that the rules that apply to everyone else do not apply to them. For example, when Ken Lay was found to have violated Enrons Code of Ethics by investing in a company that did more than 80% of its business with Enron, he called suggestions of impropriety form over substance. Rules, he said, are important, but you should not be a slave to rules either.
Professor Dacher Keltner of the University of California at Berkeley, who studies ethical leadership, further finds that leaders are often tone deaf on ethical issues and that they have uniquely self-serving rationalizations for their own unethical actions that often focus on their rights and crowd out any consideration of others rights. As Professor Zak notes: Achieving high social status appears to make it not just lonely at the top but morally perilous as well.
Ethical Leadership, Part 1: Perilous at the Top - Ethics Unwrapped (utexas.edu)Ethical Leadership, Part 2: Best Practices - Ethics Unwrapped (utexas.edu)Ethical leadership is meaningless unless it is perceived as such. To build an ethical reputation, a leader must have personal traits of a moral being as well as the ability to consistently uphold expected ethical behaviour in their leadership.
Personality and leader morality
You have probably come to the conclusion that authenticity in a leader is absolutely critical if they are to create maintain an ethical reputation - not only must they convey it, but they must believe it and live by it. Can you think of any leaders that said one thing yesterday, but did something different today? Most politicians are caught in the spotlight, as they juggle their own beliefs against those of their affiliated party.
In order to create and maintain an ethical reputation, it is the responsibility of organisational leaders to communicate the ethics message to employees and other business stakeholders. To be a moral manage, leaders must make ethics a priority and infuse ethical thinking and behaviour into their leadership style. Additionally, they must stay true to their values to avoid being perceived as inconsistent. A leader who makes decisions for personal benefits or makes decisions only to portray the company in a positive light is unlikely to be successful in developing or maintaining an ethical reputation. A recent example of a leader who was once labelled as the female Steve Jobs, Elizabeth Holmes, who started Theranos, is currently defending her actions as CEO of the company, charged with defrauding millions of dollars from investors. Read more on this in the storyElizabeth Holmes Promised Miracles By A Finger Prick. Her Fraud Trial Starts TuesdayMoral manages make ethics a priority. It is impossible to come down hard on unethical behaviour if ones own conduct is questionable, as can be seen from the Theranos Case.
Ethical leadership behaviour
An ethical leader is open with employees and all stakeholder regarding their decision making and other actions. Being open and transparent as a leader is critical in order to convey authenticity and credibility. Leaders should also explicitly communicate ethical standards and vocalise ethical expectations. Organisational leaders need to role-model expected ethical behaviours.
In understanding what defines an ethical leader, it may appear obvious that ethical leaders need ethical followers, however this is often overlooked. A willingness to be critical in the face of power does appear to play an important role in differentiating between teams, teamwork and team players on the one hand, and the destructive concept of groupthink on the other. One reason that there might be a lack of courageous followers is because followers criticising leaders is not viewed as convenient or desirable. Many leaders say they like to encourage critical thinking among their staff, but in fact, they really prefer sycophancy.
Final thoughts: can you think if an ethical leader? How about two? What makes them ethical? Are their actions consistent? Do you look up to them?
Institutionalising ethics within corporations
If those inside the corporation are to behave morally, they need clearly stated and communicated ethical standards that are equitable and enforced. This seems possible only if the standards of expected behaviour are institutionalised, that is only if they become a fixture of the corporate organisation. You may recall in topic 4, where we discussed corporate social responsibility and the important role it plays in shaping the behaviours of those within the organisation, building on this organisations can further enhance their corporate responsibly by requiring:
Ethics programs
Initiatives to institutionalise ethics generally come under the heading ethics programs and represent the formal intentions and hard controls of the organisation. Examples include code of ethics, policies outlining incentives and rewards to ethical behaviour and ethics training.
Code of ethics
A code should convey the organisations commitment to eq standards and be based on principles that aim to raise the ethical sensitivity and confidence of the employees it is directed towards. Related policies are complementary policies that assist the effectiveness of the code of ethics (e.g. whistle-blower policy).
Ethics committees
At an organizational level, the committee typically communicates the ethical code and subsequent decisions, clarifies and interprets the code whin the need arises and facilitates the codes use.
Employee training
At a minimum, training should include study of the code, a review of the companys procedures for handling ethical problems, and discussion of employer and employee responsibilities and expectations. Training can comprise formal sessions, newsletters, intranet, handbooks and induction packs.
Reward systems
Rewards and discipline signal the required ethical behaviour to other employees and therefore must be clear, visible and consistent.
Ethics monitoring
This involves the measurement of ethics-related targets across all levels of the organisation to provide feedback on the organisation's ethical performance.
Beyond the bottom line
There need not be a trade-off between ethical corporate behaviour and profitability. Companies have a moral duty to respect the rights and dignity of their employees, which can also work to the companys benefit by enhancing employee morale and thus the companys competitive performance.
Leading ethically and embedding ethical values in corporate culture will not insulate an organization from day-to-day moral issues, and leaders cannot always rely on an ethical code or related policies to assist them. Firms thar are proactive in their response to ethical issues tend to be more successful than those wo respond defensively.
However, a company that does not sincerely consider stakeholder rights as part of a genuine moral commitment is unlikely to reap the benefits of enhanced business performance.
Summary
In this topic we defined corporate culture as the beliefs, customs, value systems, and behavioural norms and ways of doing business that are unique to each corporation. We saw firsthand the influence leaders have on their followers and the wider organisation when it comes to shaping the ethical culture. Kalsteins dimensions on ethical culture highlighted how ethical and unethical behaviour can in influenced. And with this in mind, it is imperative that leaders set the tone for ethical behaviour by not only setting the standard but ensuring they are the stander to which followers will follow. Business ethics, like any other form of ethics, is vitally concerned with truth. We all have a sense of what is true and what is false, however we might not agree on what is true, or when or how something is true. No one said understanding business ethics would be easy, but perhaps that is what makes it so interesting to study.
If we look at how this topic can be applied to the BRC case study, we need not look at further than the culture within the organisations. A company culture that promotes unethical behaviour, while at the same establishing an ethics compliance team, appears hypocritical. It then shouldnt come as a surprise, this large wealth management company marginalised and greatly ignored the findings from their own ethics compliance team, in favour of rewarding the greater objective increasing profits, no matter the cost. The BRC found widespread cover-up of unethical practices and individuals not being held to account for their misconduct.
Forum Activity
Answer the question below in theForum: Ethical CompanyIn examining the importance, you place on trust and how it affects the decisions you make, would you work for a company that has a reputation of lying and cheating? Do you think people really want to work for an ethical company or will any job do?
7. Additional Readings
These additional materials are provided from the on-campus version of the subject. They are placed here to provide you with additional information that may further your understanding.
Topic 11 Lecture NotesJenkins Report
Topic 5 Corporate Social Responsibility
Overview
right10795Given the great political economic and cultural power within societies and the global marketplace, the question of corporate social responsibility is centrally important. This weeks topic will examine the issues regarding corporate social responsibility and the arguments for and against it.
Learning objectives
At the conclusion of this topic, you should be able to:
Define and understand corporate social responsibility and corporate moral responsibility
Define the broad and narrow economic views
Understand the importance of institutionalising ethics within corporations
Explore the stakeholder approach
Have a preliminary and basic understanding of stakeholder approach towards corporate governance.
What to do this week
Work through the following resources and activities to learn this week's key concepts.
Topic 5 Workbook: Corporate social responsibility
https://lms.latrobe.edu.au/mod/book/view.php?id=6986940Forum: Big Banks and a narrow view of CSR
https://lms.latrobe.edu.au/mod/forum/view.php?id=6986941Topic 5 Lecture Notes
https://lms.latrobe.edu.au/mod/resource/view.php?id=6986942Topic 5 Workbook: Corporate social responsibility
Introduction
Watch
Transcript
Hello and welcome to topic 4 Corporate Social Responsibility.
So far, we have looked at morality through the lens of the individual, but can we view organisations the same way? If corporations can make rational and moral decisions (just like you and me), then they can be held morally blameworthy or praiseworthy for their actions.
But its not as straightforward as you may think if I make a poor decision to drink and drive, then you can assign blame and judgement to me, quite easily. However, when we try to assign moral responsibility to individuals inside corporations, it becomes more difficult. One point to note, as we delve deeper into exploring this concept, companies are not people and few decisions are made by individual people. They cannot be expected to act as it they have a human conscience.
Now, if we accept the argument that corporations should be held morally responsible, the next question is: just how far should that responsibility extend? Should we hold Facebook accountable for how its users operate the platform? Is BP to blame for contributing to global warming through use of fossil fuel in automobiles? Or is McDonalds knowingly contributing to the increasing rate of childhood obesity? Organisations attempt to address some of these moral questions relating to their operations by creating a Corporate Social Responsibility strategy. In understanding why organisations pursue CSR, we need to consider the bigger picture: what is the purpose of for-profit organisations in society? Why do firms exist? What value do businesses serve for society.
Two concepts of CSR represent and extension of the ongoing debate around the role of business in society; the narrow view and the broad view.
The narrow view (or economic view), corporations sole objective is to maximise profits. Corporations may be seen as essentially private activities for the purpose and benefit of those private citizens who own them. This is morally justified by reference to the fact that corporate ownership is essentially in private hands and a citizen may dispose of his or her property as he or she sees fit, without interference from others. Milton Friedman forcefully argued that business has no social responsibilities other than to maximise profits. Friedman argued that the moral duty of a company is to make money for its shareholders. There is no moral responsibility to society outside of this.
In contrast, the societal view, also called the stakeholder view, argues that no one group of stakeholders has a priority over other groups, and that corporations must balance the interest of all stakeholders. Modern business has immense social power in such areas as minority employment and environmental pollution. If business has the power, then a just relationship demands that business also bear responsibility for its actions in these areas.
Arguments for the narrow (economic) view of CSR adopt the view that
organisations should operate in a free market,
Governments are responsible for addressing social and economic problems, and
Organisations should focus on what they are designed to do, maximise profits, not engage in social issues.
So where do our ethical theories come in to play here? CSR is an argument based on two forms of ethical reasoningconsequentialist (utilitarian) and categorical (Kantian). Consequentialist reasoning justifies action in terms of the outcomes generated (the greatest good for the greatest number of people), while categorical reasoning justifies action in terms of the principles by which that action is carried out (the application of core ethical principles, regardless of the outcomes they generate)
At a more practical level, these two ethical perspectives become realized in social norms which have been accepted by the organization, the industry, the profession, or society as necessary for the proper functioning of business. They are codified with the organization in the form of a code of conduct or code of ethics, which then acts as a point of reference or guide in determining whether a company is acting ethically according to the conventional standards. In topic 5 we transition from understanding why organisations should be good corporate citizens to exploring the moral and ethical issues of conducting business internationally and how globalisation has shaped organisations as we know them today.
Overview
Given the great political, economic and cultural within societies and the global marketplace, the question of corporate social responsibility is centrally important. Topic 5 will examine the issues regarding corporate social responsibility and arguments for and against it, such as the invisible hand, let the government do it and business cant handle it. We explore the importance of ethics in institutions and corporations, highlighting the importance of stakeholder value.
Learning objectives
At the conclusion
At the conclusion of this topic, you should be able to:
Define and understand corporate social responsibility and corporate moral responsibility
Define the broad and narrow economic views
Understand the importance of institutionalizing ethics within corporations
Explore the stakeholder approach
Have a preliminary and basic understanding of stakeholder approach towards corporate governance.
What is Corporate Social Responsibility?
corporate social responsibility (CSR) refers to the strategies that companies put into action as part of the corporate governance that are designed to ensure the companys operations are ethical and beneficial to society. Many companies have sought to become more socially responsible over the last few decades; to enhance their reputations and competitive advantage; philanthropic reasons; or to comply with legal requirements. Some common examples of good CSR is reducing carbon footprint; incorporating fair trade products into their supply chain; engaging in charity work; and improving labour policies.
Companies that embrace CSR aim to maintain profitability while supporting a larger purpose. However, some critics suggest that self-interest is more often the key motive when developing CSR policies. We can see this in the BRC case study whereby the banks were promoting corporate philanthropy while being investigated for serious wrongdoing.
Watch
What is the price of sustainability? The following video provides a quick overview on the implications of going green and the wider (unknown) cost to the community.
https://www.youtube.com/watch?v=NZ6HhdhmNJYDo companies have moral obligations to consider the afterlife of their products? Ikea are doing wonderful things in this area.Corporate Moral Agency
Corporations are legal entities, with legal rights and responsibilities similar but not identical to those enjoyed by individuals. The question of corporate moral agency is whether corporations are the kind of entity that can have moral responsibilities. Lets explore some arguments surrounding this belief:
If corporations can make rational and moral decisions, then they can be help morally blameworthy or praiseworthy of their actions. Philosophers disagree about whether the corporate internal decision (CID) structure makes it reasonable to assign moral responsibility to corporations.
The problem is compounded by the difficulty of assigning moral responsibility to individuals inside corporations.
Despite these controversies, the courts and general public find the notion of corporate responsibility useful and intelligible either in a literal sense or as shorthand for the obligations of individuals in the corporation.
Companies are not people and few decisions are made by individual people. They cannot be expected to act as if they have a human conscience.
View of CSR
If we accept the argument that corporations should be held morally responsible, the next question is: just how far should that responsibility extend? In order to understand the duty or rationale behind the development of CSR, we will explore the arguments on both sides.
Narrow view: profit maximisation
Business has no social responsibilities other than to maximise profit.
The purpose of any business is to make profits for its shareholders; managements only duty is to protect interests of the shareholders.
The only obligation that business has to others is to stay within the rules of the game.
Do you think it is fair to view tobacco and gambling companies CSR as narrow?
Activity
Have a go at the following multiple-choice question, designed to test your knowledge so far.
Broad view: social purpose
Personhood: acquiring the rights and entitlements of people brings with it the obligations of people toward others.
Social power: companies are powerful social institutions and social responsibility arises from social power.
The stakeholder model: companies should respond to those with whom it has significant relationships.
In 2020 Lego Group announced it was investing up to $400m over the next three years in its sustainability and social responsibility initiatives. For example, they are phasing out single use plastic bags in their packaging of Lego blocs and teaming up with UNICEF to give children-in-need access to play opportunities to learn new skills.
Is it reasonable to assume the Lego Group genuinely care about social and environmental impacts of their business operations?
Debating CSR
After thinking about the two questions above, you may be hard-pressed in devising a sound moral argument that supports either the narrow or broad view of CSR. Lets examine some arguments in support of the narrow view.
The invisible hand
Corporations should not be held morally responsible for non-economic matters.
To do so would:
Distort the economic mission of business
Undermine the foundations of the free-enterprise system.
Let Government do it
Corporations are profit-oriented and will profit themselves while impoverishing society.
Only a strong system of government can, and should, bring corporations under control.
Business cant handle it
It is misguided to encourage corporations to address non-business issues because they:
Lack the necessary expertise
Will impose their materialistic values on society
Yet some corporations have demonstrated that they accept responsibility for the well-being of their immediate and wider communities.
Watch
Simon Sinek is a well-known British-American author. In this video he provides an interesting view (perhaps more popular than we thins) on what may be driving companies to adopt a broad view of CSR. Do you agree with his view or are companies proactively pursuing a genuine broad view of CSR?
https://www.youtube.com/watch?v=wTidplpkqZE&t=113sSummary
CSR concerns the responsibility of an organisation for the impacts of its decisions and activities on society and the environment though transparent and ethical behaviour that contributes to sustainable development. The debate over CSR is whether it should be construed narrowly to cover only profit maximisation, or more broadly to include refraining from socially undesirable behaviour and contributing actively and directly to the public good. We examined three arguments in favour the narrow view, but critics claim there is no solid basis for restricting CSR to profit-making.
Case Study
The Commonwealth Bank claimed to invest $272m in community projects. In reality, 80 per cent of this amount is foregone revenue fees that the bank waives for low-income individuals and charities. The CBA was not alone in boasting their social philanthropy during a time when the financial services was under scrutiny from the Banking Royal Commission, Westpac advertising promoted helping people in need and the NAB more than money. Whether the banks believe that such claims will place them in a good light in the public eye is unknown.
Activity
Answer the question below in the Forum: Big Banks and a narrow view of CSR
Reflecting on the banks deeds, does the narrow view of CSR persuade you?
Additional Readings
These are provided from the on-campus version of the subject. They are placed here to provide you with additional information that may further your understanding.
Topic 4 Lecture NotesTopic 5 - Lecture Notes
Learning Objectives
Define corporate social responsibility and corporate moral responsibility
Define the broad and narrow economic views of corporate social responsibility
Explore the three key arguments in the debate: the invisible hand argument, the let government do it argument and the business cant handle it argument
200469519050What is Corporate Social Responsibility?
Figure 4.1 The pyramid of corporate social responsibly
A brief history of the corporation
The modern business corporation has evolved over several centuries and incorporation is no longer the special privilege it once was.
Corporations are legal entities, with legal rights and responsibilities similar to but not identical to those enjoyed by individuals.
Corporations are limited-liability companies owners are liable for corporate debts only up to the extent of their investments.
Corporate moral agency
Are corporations the kind of entity that can have moral responsibilities?
Corporations have no soul to be damned and no body to be kicked.
Can corporations make moral decisions?
Does corporate internal decision structure give corporations moral responsibility?
It is difficult to assign moral responsibility to individuals inside corporations.
The notion of corporate responsibility is useful and intelligible.
Personhood refers to the granting of rights and entitlements of people under the law to companies.
Companies are not people and few decisions are made by individual people- they cannot be expected to act as if they have an human conscience.
Corporate moral agency
Corporations are legal agents, but are they moral agents?
Corporations enjoy the same status and functions in society as human beings.
They can own property, enter into contracts and make decisions. Should corporations, then, be held morally responsible for their actions?
Vanishing individual responsibility
The size and impersonal structure of the corporation can result in a diffusion of responsibility.
It is difficult to assign individual responsibility because corporate structure envelops members.
Who should be responsible for actions?
Should we attribute moral agency to corporations?
Should we accept that people are willing to abrogate themselves of any personal responsibility?
These two options and not necessarily mutually exclusive.
Rival views of corporate responsibility
The narrow view: profit maximisation
Business has no social responsibilities other than to maximise profits.
The purpose of any business is to make profits for its shareholders; managements only duty is to protect the interests of the shareholders.
The only obligation that business has to others is to stay within the rules of the game.
The broad view: social purpose
Personhood: acquiring the rights and entitlements of people brings with it the obligations of people toward others.
Social power: companies are powerful social institutions and social responsibility arises from social power.
The stakeholder model: companies should respond to those with whom it has significant relationships.
Shareholder and the corporation
Managers of a corporation have a fiduciary responsibility to the shareholders.
The board of directors typically rubber-stamps the recommendations of management.
Recent changes in expectations, including investments by superannuation firms are changing this approach.
Debating corporate responsibility
The invisible hand argument
Let government do it argument
Business cant handle it argument
The invisible hand ARGUMENT
Corporations should not be held morally responsible for non-economic matters.
To do so would:
Distort the economic mission of business
Undermine the foundations of the free-enterprise system.
Criticisms of this APPROACH
Modern corporations bear little resemblance to the self-sufficient farmers and craftspeople on whom Adam Smith based his theory.
Modern corporations operate in a political and social environment in which they are pressured by public opinion and other outside influences.
Socially responsible corporate behaviour is positively correlated with financial success.
Let government do it ARGUMENT
Corporations are profit-oriented and will profit themselves while impoverishing society.
Only a strong system of government can, and should, bring corporations under control.
Criticisms of this APPROACH
It is a blueprint for an intrusive government.
Many questionable activities will be overlooked
Government can only prescribe behaviour for broad issues; it cannot anticipate specific moral challenges.
Is government a credible custodian?
Business cant handle it ARGUMENT
It is misguided to encourage corporations to address non-business issues because they:
Lack the necessary expertise
Will impose their materialistic values on society.
Yet some corporations have demonstrated that they accept responsibility for the well-being of their immediate and wider communities.
Summary
CSR is defined as the obligation for corporations to go beyond their financial and economic obligations to include the social and environmental impact of their business.
Narrow vs broad approach to profit maximisation is heavily debated. Social pressures are now forcing corporations to take responsibility for the unintended side effects of their business transactions.
We can apply the invisible had, let the government do it and business cant handle it argument to determine the moral obligation of corporations to maximise profits.
Apply and revise
Do rights and responsibilities go hand in hand? If a non-human entity can enjoy certain rights, does it naturally follow that it also has responsibilities?
Which view of CSR do you think the tobacco industry would favour? Explain why you think it would adopt that view?
Assessment 3 Case Study
SILO
Propose a moral stance in relation to a complex issue in a business ethics context though the location and management of relevant information.
Analyse and apply moral frames (in written and oral forms) to support/reject a specific moral position as it applies to a business ethics dilemma.
Argue a stance on a moral dilemma in a business ethics context in a written case study.
Purpose
The purpose of this task is to assess your understanding of ethical models though their application to real-life scenarios.
Task details
For this task you are required to write a 2200-word response to a case study that will be provided. You will analyse the case and present your response in report format.
Instructions
Based on the case study provided, analyse the case and respond to the following:
When looking at modelling character and values, what values did Stumpf model to Wells Fargo employees? What impact might that have been on the culture of Well Fargo?
When we speak about Encouraging Ethical Conduct, what behaviours can leader's model in order to encourage ethical behaviour in their organisation?
Wells Fargo did have some systems in place, like the ethics hotline, to report unethical behaviour but clearly did not work. Why do you think that is? What steps can leaders take to design systems within their organisation that encourage ethical behaviour rather than unethical behaviour?
What should Business leaders take away from this scandal? (Use two ethical theories to justify your answer)
What could Wells Fargo have done differently to avert this scandal and cultural meltdown?
Your responses should be presented in the structure of a report, as follows:
Title Page (Including your full name, student ID, workshop date/time and workshop facilitator's name)
Table of contents
Introduction
Main body (addressing all items listed above)
Conclusion
References (using at least 10 references including academic journals, books, industry sources and newspaper articles and media sources).Note, you must use APA7Assessment criteria
Wells Fargo Banking Scandal Why culture matters (2018)
Wells Fargo was the darling of the banking industry, with some of the highest returns on equity in the sector and a soaring stock price. Top management flaunted the company's lead in "cross-selling": the sale of additional products to existing customers. "Eight is great," as in eight Wells Fargo products for every customer, was CEO John Stumpf's mantra.
In September 2016, Wells Fargo announced that it was paying $185 million in fines for the creation of over 2 million unauthorised customer accounts. It soon came to light that the pressure on employees to hit sales quotas was immense: hourly tracking, pressure from supervisors to engage in unethical behaviour, and a compensation system based heavily on bonuses.
Wells Fargo also confirmed that it had fired over 5,300 employees over the past few years related to shady sales practices. CEO John Stumpf claimed that the scandal was the result of a few bad apples who did not honour the company's values and that there were no incentives to commit unethical behaviour. The board initially stood behind the CEO but soon after received his resignation and "clawed back" millions of dollars in his compensation.
Further reporting found more troubling information. Many employees had quit under the immense pressure to engage in unethical sales practices, and some were even fired for reporting misconduct through the company's ethics hotline. Senior leadership was aware of these aggressive sales practices as far back as 2004, with incidents as far back as 2002 identified.
The Board of Directors commissioned an independent investigation that identified cultural, structural, and leadership issues as root causes of the improper sales practices. The report cites: the wayward sales culture and performance management system; the decentralised corporate structure that gave too much autonomy to the division's leaders; and the unwillingness of leadership to evaluate the sales model, given its long-time success for the company.
Assessment 3 - Workshop
Case study method
Assessment 3 instructions
Theories
Case study method
Step 1: Identifying Questions & Theories
The question is: Discuss the ethical dilemma(s) that may be faced with in the decision-making process
Relevant theories:
Ethical decision-making process
Break the theory down
Prudential vs Moral Obligation
Ethical Theories
Decision-making process
Topics Covered
Why Ethics in Business Matters?
Normative Theories of Ethics Part I
Normative Theories of Ethics Part II
Test
Corporate Social Responsibility
Global Ethics
Environmental Ethics in Business
The Organisation: Ethical and Moral Issues
Ethical Practices and Expectations at Work
Test
Ethical Leadership and Culture
Ethical Decision-Making
Ethical Decision-Making Process
How do we make decisions?
Below are the steps in the ethical decision-making process:
Identify the ethical issue or problem.
List the facts that have the most influence in the decision.
Identify anyone who might be affected by your decision and how.
Explain what each affected person would want you to do about the issue.
List 3 alternative, anyone who would be harmed by this choice (and how) any values that would be compromised by selecting this alternative, and any automatic reasons why this alternative should not be selected (legal issues, rules, etc.)
Determine a course of action.
Step 1: Identifying Questions & Theories
So
We are looking for evidence in the cast to show the ethical dilemma:
Where do you see Self-Interest (prudential) or Moral Obligation (to others).
What ethics theory can be applied
How to follow the decision-making process
Step 2 : Finding Evidence & Deficiencies
Read the Case
Find the Evidence!
Step 3: Planning the response
Answer the question
Prudential vs Moral Obligation:
Discuss concepts/definitions (theories) developed in the subject
Link the facts to the dimensions
Decision making Process:
Discuss concepts/definitions (theories) developed in the subject
Link the facts to dimensions
Ethical Theories
Egoism? Utilitarianism? Kant? Virtue Ethics? Discuss the concepts/definitions (theories) developed in the subject
Link the facts to the dimensions
Be sure to write a direct response to the question!!
Integrating Theory in Your Answers
Connecting theory to the case
It is essential to integrate the relevant theories into your discussion of the case study in your assignment. You need to demonstrate that you can apply to the case what you have learned from the course and from your reading on the topic.
Use prescribed readings and concept from the subject wherever you can
Use definitions of concepts where relevant and cite appropriately
Marker ALWAYS looks at your references list to see what kinds of sources you have used quantity, quality and relevance
Integration of literature, case facts and analysis in the case study assignment
Assessment task Clarifications
The case study does not have an author or source; therefore, students can refer to the case study in the body of the report. For example: the case study statesthe case study highlights.Etc
The report will need to be written from the third person point of view. Even though some the questions are based on opinions, it must be written in third person
The word limit is 2000-2200(+/-)10%. The in-text references IS included in the word limit, the reference list IS NOT included in the word count
No executive summary is required
Wells Fargo Banking Scandal Case Study
Check each question, and find the key terms and potential key topics so we can review them
Question Potential Key Topics Paragraph
Introduction When looking at modelling character and values, what values did Stumpf model to Wells Fargo employees? What impact might that have on the culture of Wells Fargo? W1: Why Ethics in Business Matters?
W8: The Organisation: ethical and moral Issues
W9: Ethical Practices and Expectations at Work
W11: Ethics, Leadership and Culture 1
When we speak about Encouraging Ethical Conduct, what behaviours can leader's model in order to encourage ethical behaviour in their organisation? W5: Corporate Social Responsibility
W8 :The Organisation: ethical and moral Issues
W9: Ethical Practices and Expectations at Work
W11: Ethics, Leadership and Culture 2
Wells Fargo did have some systems in place, like the ethics hotline, to report unethical behaviour but clearly did not work. Why do you think that is? What steps can leaders take to design systems within their organisations that encourage ethical behaviour rather than unethical behaviour? W8 :The Organisation: ethical and moral Issues
W9: Ethical Practices and Expectations at Work
W11: Ethics, Leadership and Culture 3
What should Business leaders take away from this scandal? (use two ethical theories to justify your answer) W1: Why Ethics in Business Matters?
W2: Normative Theories of Ethics Part I
W3: Normative Theories of Ethics Part II
W11: Ethics, Leadership and Culture Research Examples 4
What could Wells Fargo have done differently to avert this scandal and cultural meltdown? W5: Corporate Social Responsibility
W8 :The Organisation: ethical and moral Issues
W9: Ethical Practices and Expectations at Work
W11: Ethics, Leadership and Culture 5
Conclusion Reference List Potential Report Structure
Title page (your name, Student ID, date and time
Table of Contents
Introduction
Main Body
P1 (Q1): Organisational culture and values (provide examples)
P2 (Q2) Promoting Ethical Behaviour in Organisations (provide examples)
P3 (Q3): Organisational Ethical Systems (provide examples)
P4 (Q4): Ethical Theories and Learning in Organisations (provide examples)
P5 (Q5): Preventing Ethical Issues in Organisations (provide examples)
Conclusion
Reference List and In text reference
Appendices (if applicable)
Topic 12 Ethical decision making
Overview
This topic draws together the key themes and concepts discussed throughout the semester. The aim is to show the practicality of ethics to facilitate accountable and responsible decision-making. ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with ethical principles. In making ethical decisions, it is necessary to perceive and eliminate unethical options and select the best ethical alternative.
Learning objectives
At the conclusion of this topic, you should be able to:
Understand the influence different ethical perspectives can potentially play in moral decision-making.
Understand how considerations of self-interest may be weighed against moral considerations in decision-making.
What to do this week
Work through the following resources and activities to learn this week's key concepts.
Topic 12: Ethical Decision Making
https://lms.latrobe.edu.au/mod/book/view.php?id=6986979Forum: The Lifeboat
https://lms.latrobe.edu.au/mod/forum/view.php?id=6986980Topic 12: Lecture Notes
https://lms.latrobe.edu.au/mod/resource/view.php?id=6986981Table of Contents
IntroductionEthical DilemmaMaking moral decisions: self-interest vs moral obligationLiving an ethical lifeSummaryAdditional ReadingsTopic 12 Ethical decision-making workbook
Introduction
Welcome to our final topic where we put it all together. What do Ken Barton, Brian Hartzer, Andrew Thornburn, Sepp Blatter and Gladys Berejiklian have in common? They all stepped down due to a dark cloud of corruption hanging over their head. You may say, well one isnt as bad as the other, but what have you learned from studying ethics? Is stealing wrong no matter the reason? You steal a grape, I steal a car, you are hungry and I need to get my pregnant wife to the hospital. Are we not serving our own self-interests at the expense of our moral obligations? Can we justify self-interest? If you are unsure who those individuals are, do a quick internet search to uncover their storythere are some very interesting tales. So what have we learned from this subject? One of the key messages I would like you to take away from studying business ethics is that ethics is not something you have today and gone tomorrow, nor is it a facade a game of who is the nicest person. Ethics involves putting our self-interests aside when it conflicts with greater moral obligations Ethical judgements require earnest, deliberate, and principled reflection on matters of moral right and wrong.
In the first 2 topics we introduced you to what ethics is, and to some of the more prevalent ethical theories- deontology, teleology and virtue.
These theories attempt to answer the central ethical questions of how we are to live together harmoniously, but no one theory is perfect. Sometimes, using a combination of the theories can help us to see the big picture by encouraging us to look at problems from different perspectives.
In order for us to make ethical decisions, we need to have the elements that make for moral decision making; moral sensitivity, moral judgement and moral motivation.
This final topic encourages you to reflect on all we have covered in this subject to help you understand what it means to be an ethical individual but most importantly, how you will grow into ethical leaders. We have only just covered the tip of the iceberg when it comes to ethical issues and I encourage you apply your critical thinking skills and seek out and understand the important role ethics plays not just in our professional life but our personal one as well.
We hope you have enjoyed this subject. Thank you for being part of Business Ethics.
Ethical Dilemma
This page presents you with an ethical dilemma relevant to this topic. You are required to watch the video and then answer the questions below in a forum.
The Lifeboat
The ship is sinking and the seas are rough. All but one lifeboat has been destroyed. The lifeboat holds a maximum of six people. There are 10 people that want to board the lifeboat. The four individuals who do not board the lifeboat will certainly die.
Woman who thinks she is six weeks pregnant
Lifeguard
Two young adults recently married
Senior citizen who has 15 grandchildren
Elementary school teacher
Thirteen-year-old twins
Veteran nurse
Captain of the ship
Which SIX people would you choose? Post your views and explanations in theForum: The Lifeboat.
This is an extreme case of an ethical dilemma and one I hope you never find yourself in, however it does raise the issue of whether we should support our own self-interest vs preserving our moral obligation. What weight should be given to self-interest, when trying to navigate moral dilemmas? Lets explore this tricky question in the next few chapters.
Making moral decisions: self-interest vs moral obligation
A common theme we have explored in this subject is weighing up what we value, our morals and the impact our decisions may have on others. Promoting ones self-interest has somewhat been cast to the naughty corner as we are not selfish creatures and to think otherwise goes against out inherent belief that we have a choice one where we consider the ramifications our actions may have on the wider community. But when should our self-interest take precedence over public interest? Lets consider whistleblowing are you morally obligated to speak up, in doing so, may result in putting ourselves at risk? While some argue self-interest should never take precedence, while others argue that it is unreasonable to expect individuals to put themselves in danger for the stake of morality. Some people overstate danger to themselves or give their self-interest more weight that the interest of others, when trying to rationalise their decision making. to live a truly moral life, we must avoid these pitfalls. We must give as much weight to others interest as we do our own adopting a more objective and rationale approach to ethical decision making
Can we justify self-interest?
Concern with self-interest (prudential) is understandable given the potentially significant risks in honouring third-party obligations.
Ethical dilemma:
Lets consider the case of the retail worker who is following the directions of their manager by selling out of code food. The worker knows this is wrong and complains to the manager. The worker continues to sell the stock an in doing so has violated three duties truth, non-injury and fairness owed to the third party (customer). Given these moral considerations, the worker should refuse to sell the stock, or even report it to senior management (blow the whistle). Now lets suppose the worker is a single parent and relies on this job to feed her family and pay the rent. With no other means of support, the consequences of job loss for the worker would be serious.
What would you do?
Do you believe the wrongdoing as issue is relatively minor, and prudential concerns should be probably taking precedence over moral ones? In other words, you endorse the actions of the worker in going along with selling the stock, at least on a temporary basis.
Morality does not impose obligations on us without regard for their cost; it does not, under present circumstances, demand that the worker resign immediately. Think back to topic 2, where we examined normative theories of ethics and what it means to be ethical. Should our need to be courageous dominate when faced with an ethical problem?
Our self-interest can conflict with our moral obligations, and our choices can have serious consequences.
Whichever way we look at the problem, different approaches to ethics can give us different answers to ethical problems. When faced with problems where our moral and prudential concerns collide, we often tend to exaggerate the importance of self-interest considerations.
For example, I will only cheat on this test because it is my final subject and I must graduate if I am to get that dream job and if I dont, I will get left behind. Exaggerating the cost to ourselves of acting otherwise makes it easier to rationalise away the damage we are doing to others.
In a business world, for instance, people talk about the survival of the firm as if it were literally a matter of life and death. Going out of business is the worst thing that can happen to a firm, yet the various people in the firm will live on and get other jobs. Keeping the company alive cannot justify seriously injuring innocent people.
This relationship between prudential and moral considerations concerns our collective interest in protecting the welfare of society by encouraging people to act in non-self-interested ways.
We have an obligation to perform a kind of reflective personality or character audit. Ethical theories can be extremely hard when determining what is right. However, we might not like what they tell us, and this is the biggest challenge for the ethical professional.
Living an ethical life
The common theme we have explored though this subject is how best to live in harmony with each other to live a life where we do not harm others. While utopian theory, this view is pushed aside as ordinary people find themselves in an extraordinary situations where they are asked to make de that tests the depths of their moral character and their resolve to do the right thing. As you have probably realised from studying this subject, it in not always easy to do what is right. Soon you will graduate and go on to become managers or supervisors, you will be instrumental in setting the ethical tone of an organisation. When you are in a position of influence and power, think about the following questions: what sort of manager would you like to be? Is it important to be an ethical leader? Is it important that the business you run is ethical? Reflecting on these questions, will help you set the right ethical tone for your followers to follow.
Ethical leadership is essential since ethics comes from the top and the leaders set the moral tone of organisations. Ethical leaders can motivate and inspire employees. They should try to do so, rather than the use of micromanagement and/or punitive measures. Micromanagers often have little faith in their own abilities to motivate and inspire their workers, which can affect employees loyalty, productivity and overall health and well-being. It is impossible for an organisation to maintain a good reputation if its leaders are not perceived as being ethical.
When it come down to the individual, a decision to live an ethical life can present challenges, but it also has great rewards. popular philosophers and psychologists have written extensively about happiness, and many argue that the accumulation of wealth and/or goods is more likely to lead to dissatisfaction and/or unhappiness. They suggest that no matter what we accumulate, we will invariably find someone who has more than us, and this leads to dissatisfaction or a feeling of inferiority or missing out.
Being kind not only improves the lives of those to whom we act kindly, but also leads to feeling of personal happiness. Doing good, then, is in own best interests.
Whichever approach appeals to a moral agent, each serves as a reminder that we should look at the big picture. How we act, and the decisions that we make, can have far-reaching effects that may not be immediately obvious. Your role as a business professional creates an obligation to society and part of fulfilling this obligation may take the form of using your position of power to achieve positive change. It is up to you whether you want to be an ethical professional. Throughout this subject, we have shown you that ethical theories that may help you to take a big picture approach and how to develop an ethical mindset to deal with moral decision making. in closing this topic and this subject, we thought you may take solace in reflecting on a few quotes form some great minds.
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Summary
In our final topic we explored the relationship between moral and prudential concerns knowing that we have no moral obligation to put our self-interest ahead of our obligations to others when to do so may cause us harm. However, where our moral and prudential concerns conflict, we must take an objective, rational approach to decision making. We highlighted that living an ethical life is a choice but the choices we make and the actions we take, can affect others in a positive and negative way. Finally, ethical leaders set the moral tone of organisations. They must consider the big picture and use their position of influence to create positive change.
Lets look back at the BRC one last time, but first, think about everything we have covered in this subject. Ethics is challenging and sometimes we can be confronted with information that does not fit our particular worldview. Many people overlook the fact that ethics requires us to challenge ourselves and examine our beliefs to determine whether they can be justified from a moral perspective.
So, were the protagonists in our case study ethical professionals? Did their self-interests over-ride their moral duty to their customers? Can we justify any of their actions? Fortunately, the BRC found there were no prudential concerns that would justify what they did they put their own interest and greed before the customers needs.
In 2019, the Commissioner handed down his findings. The Treasurer, Josh Frydenberg, vowed to take action on all 76 recommendations. However, to date, only a third of those recommendations have passed through to become law, with some being completely abandoned. So, what did we learn from the BRC? Did anything change?
Watch
The following video provides a snapshot in the aftermath of the BRC. Going forward, what lessons can we take away from this dark chapter in Australias financial sector?
https://www.youtube.com/watch?v=pV7dkvI9tIc
6. Additional Readings
These additional materials are provided from the on-campus version of the subject. They are placed here to provide you with additional information that may further your understanding.
Topic 12 Lecture Notes
