Managing Business Ethics

Linda Treviño and Kate Nelson bring together a mix of theory and practice in Managing Business Ethics: Straight Talk about How to Do It Right, 7^th Edition. In this new edition, the dynamic author team of Linda Treviño, prolific researcher and Distinguished Professor, and Kate Nelson, Professor and longtime practitioner of strategic organizational communications and human resources, equip students with the pragmatic knowledge they need to identify and solve ethical dilemmas, understand their own and others’ ethical behavior, and promote ethical behavior in their organization. Managing Business Ethics is the perfect text to prepare students for a range of roles in the business world—managers across business functions, communications professionals, compliance officers, corporate counsels, human resources managers, and senior executives.

Preface xv

Acknowledgments xix

Section I Introduction

1 Introducing Straight Talk about Managing Business Ethics: Where We’re Going and Why 2

Introduction 2

The Financial Disaster of 2008 4

Borrowing Was Cheap 4

Real Estate Became the Investment of Choice 5

Mortgage Originators Peddled “Liar Loans” 5

Banks Securitized the Poison and Spread It Around 6

Those Who Were Supposed to Protect Us Didn’t 7

Moving Beyond Cynicism 10

Can Business Ethics Be Taught? 14

Aren’t Bad Apples the Cause of Ethical Problems in Organizations? 15

Shouldn’t Employees Already Know the Difference between Right and Wrong? 16

Aren’t Adults’ Ethics Fully Formed and Unchangeable? 17

This Book is About Managing Ethics in Business 20

Ethics and the Law 21

Why Be Ethical? Why Bother? Who Cares? 22

Individuals Care about Ethics: The Motivation to Be Ethical 23

Employees Care about Ethics: Employee Attraction and Commitment 24

Managers Care about Ethics 25

Executive Leaders Care about Ethics 26

Industries Care about Ethics 26

Society Cares about Ethics: Business and Social Responsibility 27

The Importance of Trust 28

The Importance of Values 30

How This Book Is Structured 31

Conclusion 32

Discussion Questions 33

Exercise: Your Cynicism Quotient 34

Notes 35

Section II Ethics and the Individual

2 Deciding What’s Right: A Prescriptive Approach 38

Ethics and the Individual 38

Ethical Dilemmas 38

Prescriptive Approaches to Ethical Decision Making in Business 39

Eight Steps to Sound Ethical Decision Making in Business 53

Practical Preventive Medicine 59

Conclusion 62

Discussion Questions 62

Exercise: Clarifying Your Values 64

Introducing the Pinto Fires Case 64

Case: Pinto Fires 65

Short Cases 70

Notes 70

3 Deciding What’s Right: A Psychological Approach 72

Ethical Awareness and Ethical Judgment 72

Individual Differences, Ethical Judgment, and Ethical Behavior 76

Cognitive Moral Development 77

Locus of Control 84

Machiavellianism 85

Moral Disengagement 86

Facilitators of and Barriers to Good Ethical Judgment 88

Thinking about Fact Gathering 89

Thinking about Consequences 90

Thinking about Integrity 92

Thinking about Your Gut 94

Unconscious Biases 95

Emotions in Ethical Decision Making 96

Toward Ethical Action 99

Revisiting the Pinto Fires Case: Script Processing and Cost Benefit Analysis 104

Cost–Benefit Analysis 106

Conclusion 108

Exercise: Understanding Cognitive Moral Development 108

Discussion Questions 109

Short Case 109

Notes 110

4 Addressing Individuals’ Common Ethical Problems 114

Identifying Your Values—and Voicing Them 115

People Issues 118

Discrimination 118

Harassment, Sexual and Otherwise 122

Conflicts of Interest 126

What Is It? 126

How We Can Think about This Issue 130

Why Is It an Ethical Problem? 131

Customer Confidence Issues 132

What Is It? 132

How We Can Think about This Issue 136

Why Is It an Ethical Problem? 137

Use of Corporate Resources 137

What Is It? 137

How We Can Think about This Issue 142

Why Is It an Ethical Problem? 143

When all Else Fails: Blowing the Whistle 143

When Do You Blow the Whistle? 146

How to Blow the Whistle 146

Conclusion 151

Discussion Questions 151

Short Cases 152

Notes 153

Section III Managing Ethics in the Organization

5 Ethics as Organizational Culture 158

Introduction 158

Organizational Ethics as Culture 159

What Is Culture? 159

Strong versus Weak Cultures 159

How Culture Influences Behavior: Socialization and Internalization 160

Ethical Culture: A Multisystem Framework 161

Alignment of Ethical Culture Systems 162

Ethical Leadership 163

Executive Leaders Create Culture 163

Leaders Maintain or Change Organizational Culture 164

Other Formal Cultural Systems 174

Selection Systems 174

Values and Mission Statements 175

Policies and Codes 177

Orientation and Training Programs 179

Performance Management Systems 180

Organizational Authority Structure to Support Responsibility 182

Decision‐Making Processes 186

Informal Cultural Systems 187

Role Models and Heroes 188

Norms 189

Rituals 190

Myths and Stories 190

Language 191

Organizational Climates: Fairness, Benevolence, Self‐Interest, Principles 193

Developing and Changing the Ethical Culture 194

How an Ethical Culture Can Become an Unethical Culture 195

Becoming a More Ethical Culture 196

A Cultural Approach to Changing Organizational Ethics 199

Audit of the Ethical Culture 199

Cultural Systems View 199

A Long‐Term View 200

Assumptions about People 200

Diagnosis: The Ethical Culture Audit 201

Ethical Culture Change Intervention 203

The Ethics of Managing Organizational Ethics 204

Conclusion 205

Discussion Questions 205

Case: Culture Change at GM? 206

Case: Culture Change at Texaco 207

Case: An Unethical Culture in Need of Change: Tap Pharmaceuticals 209

Case: “Bad to the Bone” 211

Notes 213

6 Managing Ethics and Legal Compliance 218

Introduction 218

Structuring Ethics Management 218

Making Ethics Comprehensive and Holistic 222

Managing Ethics: The Corporate Ethics Office 222

Ethics and Compliance Officers 222

The Ethics Infrastructure 224

The Corporate Ethics Committee 225

Communicating Ethics 225

Basic Communications Principles 226

Evaluating the Current State of Ethics Communications 228

Multiple Communication Channels for Formal Ethics Communication 230

Interactive Approaches to Ethics Communication 232

Mission or Values Statements 235

Organizational Policy 237

Codes of Conduct 238

Communicating Senior Management Commitment to Ethics 240

Formal and Informal Systems to Resolve Questions and Report Ethical Concerns 245

Using the Reward System to Reinforce the Ethics Message 248

Evaluating the Ethics Program 248

Surveys 248

Values or Compliance Approaches 249 Globalizing an Ethics Program 250

Conclusion 251

Discussion Questions 251

Short Case 252

Appendix: How Fines Are Determined under the U.S. Sentencing Guidelines 253

Notes 255

7 Managing for Ethical Conduct 257

Introduction 257

In Business, Ethics is about Behavior 257

Practical Advice for Managers: Ethical Behavior 258

Our Multiple Ethical Selves 258

The Kenneth Lay Example 259

The Dennis Levine Example 261

Practical Advice for Managers: Multiple Ethical Selves 261

Rewards and Discipline 262

People Do What Is Rewarded and Avoid Doing What Is Punished 262

People Will Go the Extra Mile to Achieve Goals Set by Managers 263

How Goals Combined with Rewards Can Encourage Unethical Behavior 264

Practical Advice for Managers: Goals, Rewards, and Discipline 265

Recognize the Power of Indirect Rewards and Punishments 266

Can Managers Really Reward Ethical Behavior? 268

What About the Role of Discipline? 269

Practical Advice for Managers: Discipline 271

People Follow Group Norms 272

“Everyone’s Doing It” 272

Rationalizing Unethical Behavior 273

Pressure to Go Along 273

Practical Advice for Managers: Group Norms 273

People Fulfill Assigned Roles 275

The Zimbardo Prison Experiment 275

Roles at Work 277

Conflicting Roles Can Lead to Unethical Behavior 277

Roles Can Also Support Ethical Behavior 278

Practical Advice for Managers: Roles 278

To Authority: People Do What They’re Told 278

The Milgram Experiments 279

Obedience to Authority at Work 281

Practical Advice for Managers: Obedience to Authority 282

Responsibility is Diffused in Organizations 282

“Don’t Worry—We’re Taking Care of Everything” 282

Diffusing Responsibility in Groups 283

Diffusing Responsibility by Dividing Responsibility 284

Diffusing Responsibility by Creating Psychological Distance 285

Practical Advice for Managers: Personal Responsibility 286

Stressed‐Out Employees are More Unethical 286

Practical Advice for Managers: Stress 287

Conclusion 287

Am I Walking My Ethical Talk? 287

Discussion Questions 288

Case: Sears, Roebuck, and Co.: The Auto Center Scandal 289 Short Case 291

Notes 292

8 Ethical Problems of Managers 295

Introduction 295

Managers and Employee Engagement 295

Managing the “Basics” 298

Hiring and Work Assignments 298

Performance Evaluation 300

Discipline 303

Terminations 305

Why Are These Ethical Problems? 307

Costs 308

Managing a Diverse Workforce 308

Diversity 309

Harassment 311

Family and Personal Issues 312

Why Are These Ethical Problems? 315

Costs 315

The Manager as a Lens 315

The Buck Stops with Managers 316

Managers Are Role Models 319

Managing Up and Across 319

Honesty Is Rule One 320

Standards Go Both Ways 321

Conclusion 322

Discussion Questions 322

Short Cases 323

Notes 324

Section IV Organizational Ethics and Social Responsibility

9 Corporate Social Responsibility 326

Introduction 326

Why Corporate Social Responsibility? 326

Types of Corporate Social Responsibility 334

Economic Responsibilities 334

Legal Responsibilities 335

Ethical Responsibilities 335

Philanthropic Responsibilities 336

Triple Bottom Line and Environmental Sustainability 339

Is Socially Responsible Business Good Business? 343

The Benefit of a Good Reputation 344

Socially Responsible Investors Reward Social Responsibility 344

The Cost of Illegal Conduct 345

The Cost of Government Regulation 346

What the Research Says about Social Responsibility and Firm Performance 349

Being Socially Responsible Because It’s the Right Thing to Do 352

Conclusion 354

Discussion Questions 354

Case: Merck and River Blindness 355

Short Case 357

Notes 357

10 Ethical Problems of Organizations 362

Introduction 362

Managing Stakeholders 363

Key Stakeholder Groups 365

Ethics and Consumers 365

Ethics and Employees 369

Ethics and Shareholders 371

Ethics and the Community 372

Key Ethical Issues Involving Multiple Stakeholders 373

Product Safety 373

Pricing Issues for Prescription Medications 378

Environmental Catastrophes 380

Additional Environmental Bombshells 381

Why Are These Ethical Issues? 382

Costs 382

Classic Ethics Cases 383

First: The Less-than-Ideal Examples 383

Models to Consider and Admire 388

Conclusion 390

Short Cases 391

Discussion Questions 395

Notes 395

11 Managing for Ethics and Social Responsibility in a Global Environment 399

Introduction 399

Focus on the Individual Expatriate Manager 399

The Difficulties of Foreign Business Assignments 400

The Need for Structure,Training, and Guidance 400

Foreign Language Proficiency 401

Learning about the Culture 401

Recognizing the Power of Selective Perception 403

Assumption of Behavioral Consistency 404

Assumption of Cultural Homogeneity 404

Assumption of Similarity 405

How Different Are Ethical Standards in Different Cultures—Really? 412

Development of Corporate Guidelines and Policies for Global Business Ethics 414

The Organization in a Global Business Environment 418

Deciding to Do Business in a Foreign Country 418

Development of a Transcultural Corporate Ethic 428

Conclusion 431

Discussion Questions 432

Short Case 433

Case: Selling Medical Ultrasound Technology in Asia 433

Case: Google Goes to China 436

Notes 441

Index 447