Module 8 Developing Ethical Behaviour in Our Leader

8.1understandig ethics
story of man living life as good person not being apprecaited accused of being danger to society
convicted and condemed choosing not to escape as unethical break the rules is wrong, even if
unjust.
8.1.1Ethical Dilemmas as a conflict of duties
Story above is Socrates. Felt bound by morality, what is right or wrong.
Most ethical problems arise form conflict of duties when 2 moral constscsts are in conflict, maybe
both be wrong. Decision on which take precedes in this case obedinec to law over saving his life,
teach elsewhere etc.
Ethics and Leadership
Ethics, the study of moral philosophy, helps us deal with abstract concepts such as good,
truth, justice, love, virtue, compassion and, ultimately, what is right and what is wrong.
8.2Ethics and Laws
Morality is a social construct in existnace prior to individuals an organisations. Morality evolves
with time. ( eg salvaery, labour law)
Ethically accepted praotices vary across cultures. - pay differences, gifts, hiring relatives.
8.2.1The diffenrece between ethical behaviour and legal behaviour
both are moral conventions but ethics are not legislated and are not punished.
Eg story of facotry fire in 1911 Triangle Shirtwaist many died. Many unethical proacitces but
within current legal guidelines. - at least lead to significant period of facory legislation.
Many civil protest have been because law were seen as unethical.
8.3Contemporary Ethical Behaviours in Business.
Still have ehtical problems fraud, actiosn that lead to caollapse and bankrupcy. Certainly
unethical, allegly ilegal. Even within US highly regualted environmanent. But also globla, ilegal use
of empuyess pension fund, using ocmpany money for executive use, failure to prusue copytright
infringments in delveoping countires.
Some could be address in courst but expsively and ineficeintly. Yet the law make it clear that such
behaviour is non acceptable business behaviour.
There are grey areas that are not legislated eecutime compensation, moving jobs offshore, medical
exerimentation in countries with fewer reestrictions, animal experiemtntatiion, environemntal
damnge.
8.4Ethics as the challenge to Do What's Right
Warren Buffet (2002) stated: To clean up their act,
CEOs dont need independent directors, oversight committees or auditors absolutely free of
conflicts of interest, but simply need to do whats right.
8.4.1Finding what is right and doing what is right
This is the point of the issue. Doing what is right is no self evidemt. Often dilemmas due to 2
comepting ethical ocncers and jedgements requirs savfirice of one for greater food of other.
Jackson (1996:

8) points out that there are actually two difficulties in ethical business behaviours,
difficulties in identification of what is your duty in a particular situation: and difficulties
of compliance of doing your duty once you know what it is.
Ethicla guidelines could help in uscha case but oftne limited and based on past expeirence, in a fact
changing world. Espeically by ethical dimeaas due to rapid advances I scinec nand tehcniloigy.
8.4.2.Codes of tehics in biusness
To promote ethical behaviours corporate codes of ethics. Published code or satetemtn of
organisations value designe dot promote ehical behaviours. Moslty in US, less in UK, less in EU
and an excetion for australian.
Often written as presciuptie practices that imitate criminal law prohibit or prescribe certain
behvaiors eg in accitnability, trde secrets, customers care, whistle blowres protection.
Internally focused toprotect host organisation.
Unliekt to be inspirations and provide ethical guidelines for behavirour amoing employees. If so
written as value statements as an exercise to promote company vision and mission staemtne.
No evidnce tha wirtten code has anu implicaiotn on actual ethical behvaiour 0 eg Enron;s code had
little meaning to the executives who bakrupted it.
Business are ethical only when the leads act ethically.
8.4.3ethics and the Profit motive in bisness.
Leaders make ethical decision in light of corportae enviroment.
Neoclassical theory defines interaction between bisness and socirty obligations to profit for
shareholder with no concerns outside this obligation.
Indded such concerns would interfeed with obligationto shareholder ehtical behaviours should be
of concern only if they affect profit.
Addressing concerns outside the primary concern for
profit is to neglect the fiduci ary responsibilities of management!
8.4.4Moving Beyond profits
Stormer 2003 times have changes and world is too interrelated. Profi ts, while necessary, are no
longer sufficient,
and there is a growing recognition that in many cases, corporate power is eclipsing the power
of nations.
Business must therefore consider the general public as well as the shareholder for long term.
DeGeorge 1995 - Business is an
activity in which human beings associate with one another to exchange goods and services
for their mutual advantage. It is not an end in itself. It is a means by which people endeavour
to attain a good life for themselves and their loved ones.

8
8.5The business ethics gap
Svensson and Wood 2003 - business ethics is a function of society and both change over time. The
ethical stance can be examined in terms of how alined it is within the social setting.
Negative gap lags behind social expectations
no gap refelct current social normals and host culture

positive gap a step ahead

8.5.1The negative ethics gap
1979 - Ford stood in defence of ill-designed fuel tank. Charged with criminal homicide. Was aware
of issued but went ahead cos cheaper. Cost benefit analyss of recall or cuasing death or injury and
recall was found to be more expensive. Expected jury to be sympatetic. Took aggressive stance of
setltign claimsonly when could not prove dirver negligence.
Wildly reported in media. Mainted negative gap through the years for health and safely. Kept
fighting each charge against the economic class.
Yet maintains a position amond words top car manugacturets.
8.5.2Ethical Congruence
Food insductry maitain a conguent ethics gap that reflect contemporary social views about food
safety. Eg production of organically grown or devoid of GM products. Usually limited selection and
at premium cost but still response to public debate.
Obesity issue gov asking firms to support healthier eating proacitce less salt, healthier
alternative and modified advertising. Firms try to come to grips with proglme whilst keeping eye
onbottom line. Mc donalds removed supersize fries and drinks. Yet not all eg Kraft said changes
would be impractical and lead to certain confusion.
Coca cola reponsed to critism by covereing company logos on its 100 000 school vending machines
and load mre water and juices.
Firms have not resisted socitiel pressure but try to show they are ethically congruent with changing
cultural perspectives.
8.5.3The positive ethics gap
excess and influece societal nroms. Volvo's empaqhsis on safety
Cars are driven by people. The guiding principle behind everything we make at Volvo,
therefore, is and must remain safety (Volvo, 2001)
Toward that end, Volvos safety philosophy has evolved to address three major areas of
safety: avoiding accidents whil e driving, avoiding injury when accidents occur, and protec-tion
from car thefts (Volvo, 2002)
Eg introcuded safety belts in 1959 decades befre they were legally required.
Cynics argue it was used purpely as competive streatgy
the irony is that Ford bout Volvo in 1999 and used it to raise its saety profile in the industry.
8.5.4The Brent Spar : When two views collide
Positive gap may not be commercially viable.
Brent Spar giant Noth sea platform owned by Shell 0 retired in 1995 Shell wanted to dump it at
sea and save 5-40% of the millions of dollars to tow it to land and dismantle.
Angry response from Greenpeace to large scale pollution and environmental protest europe wide.
Shell examined that it sinking the the stucture was safer and accidnet free and might also be greener

option due to waste produced, fuel and also once cleaned could provide habitat for marine life.
Etheical dilemma better choice of dumping at sea in face of outrage or give in? Shell tried various
initiatives to avoid dilemma and change public opinion through workshops and website for debate.
Greenpeace called for a total ban. Shell gave in.
Shell would have prefered a positive gap but opted for congurence.
To make things worse the waste products turned out to be much less than their activists
oveesitamted, much to their embararsment and reputation.
8.5.5The ethical stance in times of crisis
A predetermined ethical stance will probably affect an organisations decision process in
times of crisis. Johnson and Johnson reputation for highly ethical manufacturing 1982 crisis
ethical response altough costly - retianed long term viability as company but also product 7 dead
due to drug being spiked with cyanide by unknown member of public as soon as crisis occurred
entire recall of product reintriduced procuts with teuple seal pakage and trust building advertising
cmapain. Withing 6 moonths back to 65% sales and repoutaiton reianed intact Fannin 1983.
In contrast unethically manged crisis Ford Pinto car transmission slip into reverse thousands
of complains and many fatalities denied responsaiblity even though knew of defect rpeviosly
ended up with massive recall.
Homes being build of grounds used to toxic wastes and Hooker Chemical company resposnable
accepted to pay for damages only 6 years after
Manville Compnay producing asbestos contianing material, despite knoledge of its damage, puttin
reposability on government for damanges doing cost cutting and focus on promsing businesses
paying only part of damges.
Siomkos (1972) pointed out that the unsuccessful handling of crises by these companies
tended to show several, if not all, of the following characteristics in common:
1. The companies recalled or stopped production of the product or process only after they
were ordered to do so by the courts.
2. There was either a total lack or only an ineffi cient use of public relations or advertising
campaigns.
3. The companies tended to restructure the organisation, focusing on cost-cutting,
downsizing and disposal.
4.Government was often deemed responsible for the crisis.
(narrow short term focus on bottom line at expense of wider ethical considretoin invovling other
stake holders long term financial loss)
8.6A Roadmap for ethical decisions
every 'should' question has ethical consideration cost charge, new hires, offhsoring, investments.
How to decide the ethical/right thing to do?
8.6.1The Deontological or Contractarian Aproach
deontological or contractarian theory ethical behaviours based on unchaing principles which set
out rights duties and rules.
German philopher Immanuel Kant 1724-1804 universal principles. Eg respect, notusing others, no
deceitfullpromises, helping others, not wasting natural talens.
Seems logocal approach for org to develop and univesally act of such principles. And best policy

would be to be honest with employees, customers and suppliers and not do business ina country tha
exploits citizens.
Critism outocome not considered. What if the 'right' leads to a lesser good or harm? What if
withholding information is to our advantage or otehrs? What if truth and openess provide others
undue advantage over us? What if we can provide jobs for the repressive country, and maybe outisd
einfluence?
Contractarian theory might result in morally unaccaptabel outcomes.
8.6.2The Utilitaian appaorch
outcome morality course of action that provides the greaterst good. Eg work with repressive
country gives them job and us profit for shareholders. And if nt us someone else will.
Ctisitms what define the good? Is it personal happiness, the welfare of the many, having
individual
freedom of choice, pleasure, or some combination of factors? Competing defintiions by comepeting
stkaeholders. Good for one but not another. Eg Brent Spar case.
No procipleis about the 'how' get to outcomes, yet the end justifies the means?
8.6.3Moral Virtues
Jennifer jackson 1996 raher than focus on external guidelines or outcomes focus should be on
develping moral virtures allow to make ethial deciosns for a a life worth living. Exercising such
virtues requires the applicatio n of emotion and judgem ent, but not at the
expense of either. Both feel and act approprately. And central to the whole process is the
understanding of moral character but also one must
also be aware of vices in character and avoi d them, because they diminish our chances of
leading a life worth living.
Two dimensitons to living well and tehs elead to to idnetifical of character trais or virtures;
Social we need to live in community, peace with each other and uphold each others rights loyalty, honesty, fairness, compassion, generosity and friendliness.
Aspirational promote inner peace. Sense to acomplish soething, find prupose in life, devleope
sense f persoanl fulfillment. Desire for fullfilling relations, self respect, mentail stimulation,
indepdnece an sense of singifcance. - prudence or
sensibility, ambition, enthusiasm, modesty an d self-knowledge.

No ready made naswers for organisaiotn ehtical behviours moral character of leadres is dirving
forece ebhind ehtical behvaior ethical behviors cannot be legislated cannot be guided through
written codes/princples or judge soely by outcome. Rather, it emanates from the moral character of
the leaders we develop within our organisa-tions.
8.7Leadership and Ethical Behvairos
Management counts. It is very clear that the actions of organisational leaders impact on the
resultant behaviours of their employees. For it is the leaders who have th e ability to establish
and communicate organisational values and then ensure compliance through the imposition of
rewards and sanctions. Additionally, social learning theory suggests that employees learn

through observing and imitating others (Bandura, 1986). Therefore, if leaders wish to ensure
that their organisations act in an ethical mann er, they must not only model ethical behaviours
themselves, but also ensure that their subordinates model those behaviours as well. In effect,
ethical behaviour must become a part of the day-to-day fabric or culture of the organisation.
Individuals who have a strong belief in universal moral rules are more likely to act ethical-ly than
those without such beliefs. However, it is clear that when a leader is perceived to
have a high level of integrity, the ethical intentions of his or her subordinates, whether they
have strong moral beliefs or not, will be higher (Peterson, 2004). By the same token, it is also
important for leaders to deal with unethical behaviour, for not to deal with the behaviour will
clearly leave an unwanted message. One study of the effect of punishment on the ethical
behaviour of salespeople showed that dealing se verely with unethical behaviours of individu-als
had a strong influence on the ethical be haviours of the salesforce in general.
8.7.1Advising and Judging as Ethical Requiremens of Leadership
Advising and judging are an important part of morality and implicit in the role of organisa-tional
leadership. Assuming that, as an organisational leader, we have developed the moral
character to deal with ethical decisions, it is cl ear that we may, nevertheless, be biased in our
judgements. For example, Bisking et al . (2003) found that gender influences our decision-making
when applying discipline. Although the gender of the leader was not found to make
a difference, in scenarios where discipline was to be applied, women were disciplined more
severely in cases involving drugs and theft. Only in cases of sexual harassment were they
treated more leniently. Similarly, it has been shown that we may well be unconsciously
influenced to make unethical deci sions by implicit forms of prej udice, bias that favours ones
own group, conflict of interest and a tendency to over-claim credit (Banaji et al ., 2003).
Because these prejudices are unconscious, they are particularly difficult to counter; the faith
in our own objectivity may not be well plac ed, requiring external input and feedback.
By its very nature, ethical behaviour is difficult to define, as most dilemmas are the result
of two competing ethical considerations: both outcomes are preferable but not possible.
Additionally, there are broad differences among cultures. For example, showing preferences
for dealing with family members and friends may be the way business is conducted in some
countries; in others, such practices would clearly be considered unethical. Nevertheless, we
can begin to decide whether a course of acti on is ethical or not by asking a few basic
questions. If the answer to any of the following questions is yes, then it would, in our view,
clearly be a sign that the behaviour should be examined as to whether or not it is ethical.
Is the practice harmful to people? This qu estion applies not only to our employees but
also to the organisations sh areholders and stakeholders.
Does the practice impinge on human dignity? The fair and considerate treatment of our
fellow humans is undoubtedly a key consid eration in choosing ethical behaviours.
Is the practice harmful to the environment? Given the considered view of many that an
environmental crisis looms, this questi on can only be of increasing importance.
Does the practice provide gains to individuals at the expense of the organisation? Just as
the organisation must show concern for indi viduals, so must individuals respect the
organisation.
Is the practice such that it is hidden so as not to arouse criticism? As soon as it is felt that
a behaviour must be hidden from others with in the organisation, it is clearly open to
ethical scrutiny.
We believe that ethics will likely become an increasingly important aspect of your deci-sion-making
process as a leader in your organisations. Although we can ask questions such
as those above, we also readily acknowledge that there are, unfortunately, no easy guidelines
or roadmaps as to precisely what constitute s ethical behaviour. Nevertheless, leaders
actions, or lack of action, will profoundly affect the ethical stance of their organisations. And

the ethical stance chosen will certainly affect shareholders and stakeholders alike. There
appears to be little doubt that good ethics is good business.