Values & Ethics

Learning Objectives
• After studying the chapter, you should be
able to:
– Explain what values, attitudes, are and describe
their impact on managerial action.
– Illustrate how ethics help managers determine the
right or proper way to behave when dealing with
different stakeholder groups.
– Explain why managers should strive to create
ethical organizational cultures
 Values & Ethics (Lesson Plan)
• Introduction
• THE CHARACTER OF VALUES AND ETHICS
• INFLUENCES ON ETHICAL BEHAVIOR
• PRACTICAL GUIDE TO ETHICAL DECISIONS
• SOURCES OF ETHICS
• Ethical Decisions and Dilemmas
• BUILDING AN ETHICAL CLIMATE
• CONCLUSION
• Discussion
• ( Total Time- 2 hrs)
 INTRODUCTION
• Values and ethics are central to any
organization; those operating in the
national security arena are no exception
• Both are extremely broad terms, and we
need to focus in on the aspects most
relevant for strategic leaders and decision
makers
 Values

• Values
– Describe what managers try to achieve through work
and how they think they should behave
– Values can be defined as those things that are
important to or valued by someone. That someone
can be an individual or, collectively, an organization.
One place where values are important is in relation to
vision. One of the imperatives for organizational vision
is that it must be based on and consistent with the
organization's core values
.
 Values of Cummins India Ltd
• Integrity
• Innovation
• Delivering Superior Results
• Corporate Responsibility
• Diversity
• Global Involvement
 Assignment
• How does Cummins India Ltd ensure that
its six core values are met?
• THE CHARACTER OF VALUES AND
ETHICS
 Values
• Terminal Values
– A personal conviction about life-long goals
• A sense of accomplishment, equality, and self-respect.
• Instrumental Values
– A personal conviction about desired modes of
conduct or ways of behaving
• Being hard-working, broadminded, capable.
• Value System
– The terminal and instrumental values that are the
guiding principles in an individual’s life.
Terminal
and
Instrume
ntal
Values

Source: Rokeach,
The Nature of Human
Values (New York:
Free Press, 1973).
 Ethics and Stakeholders
• Organizational Stakeholders
– Shareholders, employees, customers, suppliers,
and others who have an interest, claim, or stake
in an organization and in what it does
• Each group of stakeholders wants a different outcome
and managers must work to satisfy as many as
possible.
• Managers have the responsibility to decide which
goals an organization should pursue to most benefit
stakeholders—decisions that benefit some
stakeholder groups at the expense of others.
 Ethics and Stakeholders
(cont’d)
• Ethics
– Moral principles or beliefs about what is right
or wrong
– Ethics guide managers in their dealings with
stakeholders and others when the best course
of action is unclear.
– Managers often experience an ethical
dilemma in choosing between the conflicting
interests of stakeholders.
 Ethical Decision Models
• Utilitarian Model
– An ethical decision is one that produces the greatest
good for the greatest number of people.
• Moral Rights Model
– An ethical decision is one that best maintains and
protects the fundamental rights and privileges of the
people affected by it.
• Justice Model
– An ethical decision is one that distributes benefits and
harms among stakeholders in a fair, equitable, or
impartial way.
 Practical Guide to Ethical
Decisions
• Does the manager’s decision fall within usual
and accepted standards?
• Is the manager willing to personally and
openly communicate the decision to all
affected stakeholders?
• Does the manager believe that his friends
would approve?
• If the answer is “Yes” to all of the above, the
decision is probably an ethical decision.
 Ethical versus Unethical
Decisions
• Ethical Decision
– A decision that is reasonable or typical
stakeholders would find acceptable because it
aids stakeholders, the organization, or society.
• Unethical Decision
– A decision that a manager would prefer to
disguise or hide from other people because it
enables the company or a particular individual to
gain at the expense of society or other
stakeholders.
Sources of An
Organizations
Code of
Ethics

Figure 3.7
 Sources of Ethics
• Societal Ethics
– Standards that govern how members of a society are
to deal with each other on ethical issues
• Based on values and standards found in society’s legal
rules, norm, and mores
• Codified in the form of laws and societal customs
• Ethical norms dictate how people should behave.
• Societal ethics vary among societies.
– Strong beliefs in one country may differ elsewhere.
• Payment of bribes, an illegal act in the U. S., is an accepted
business practice in many countries.
 Sources of Ethics
• Professional ethics
– Standards that govern how members of a profession
are to make decision when the way they should
behave is not clear-cut
• Physicians and lawyers have professional associations that
enforce these.
• Individual ethics
– Personal standards that govern how individuals are
to interact with other people
• Influenced by family, upbringing in general, and life
experiences
Ethical Decisions and Dilemmas
• A key ethical issue is how to disperse harm and
benefits among stakeholders.
– If a firm has been very profitable for two years, who
should receive the profits? Employees, managers and
stockholders all will want a share.
– Should the firm keep the cash for future slowdowns?
What is the ethical decision?
– What about the reverse, when firms must layoff
workers?
– If stockholders are the legal owners of the firm,
shouldn’t they alone decide these questions?
Ethical Decisions and Dilemmas
(cont’d)
• Some other issues managers must consider.
– Should a firm withhold payment to suppliers as long
as possible to benefit the firm?
• This will harm its supplier who is a stakeholder.
– Should a firm provide severance pay to its laid off
workers?
• This will decrease the owners’ (the stockholders return.
– Should goods be bought from overseas firms that
employ children?
• If they aren’t bought, the children might not earn enough
money to eat.
 Why Behave Ethically?
• Managers should behave ethically to avoid
harming others.
– Managers are responsible for protecting and
nurturing resources of the firm
• Unethical managers run the risk for loss of
reputation.
– This is a valuable asset to any manager;
reputation is critical to long term management
success.
INFLUENCES ON ETHICAL BEHAVIOR
 INFLUENCES ON ETHICAL
BEHAVIOR
• PRIOR DEVELOPMENT OF INDIVIDUAL
AS ETHICAL PERSON.
• THE ORGANIZATION AS AN ETHICAL
ENVIRONMENT.
• PROCEDURES THAT ENCOURAGE
ETHICAL BEHAVIOR
 Ethical Organizational Cultures
• Components of an Ethical Culture
– Ethical values and norms are a central component
of the organizational culture
– A code of ethics guides decisions when ethical
decisions arise.
– Managers serve as ethical role models
• Ethics Ombudsman
– An ethics officer who monitors an organization’s
practices and procedures to ensure they are
ethical.
 Johnson &
Johnson
Credo

Source: Johnson & Johnson Annual Report. Figure 3.9

• The ethical standards that one observes in the
organization will have a significant effect on individual
behavior. "People will do what they are rewarded for
doing" (Andrews). The organization has its greatest
impact in the standards it establishes for ethical and
unethical conduct in its formal reward systems. Informal
norms also have a strong influence on individuals'
behavior as do the actions of the leaders of the
organization. Strategic leaders must understand that
their actions, more than words alone, will determine the
operating values in the organization.
 CONCLUSION
• Establishing moral principles means
determining the core values which should
guide the organization. O'Brien suggests
four for consideration: localness, merit,
openness, and leanness