496 week 3

Week 3: Business Ethics and the Individual

“We may pretend that we are basically moral people who make mistakes, but the whole of history proves otherwise.”

                                                    Terry Hands 1941-, British theatre and opera director

Overview:

People are quick to say that it is not the business that did bad things but the people who run the corporation.  This week’s thrust is the examination of ethics from the individual’s perspective in the workplace.  What ethical behaviors should the individual exhibit? And what behaviors should the individual expect from the business? Also discussed are several unique 21st century ethical issues facing the individual in the workplace.

27 Psychological Reasons Why Good People Do Bad Things

Max Nisen and Aimee Groth

 Max Nisen and Aimee Groth

Aug. 27, 2012, 2:35 PM

The white-collar crimes that lead major companies to collapse usually begin with seemingly minor ethical violations that spiral into something much bigger. 

The question of what motivates smart and talented people to commit fraud is fascinating, and is the subject of a new paper by Dr. Muel Kaptein of the Rotterdam School Of Management. 

We've put together some of his most interesting insights on the situations and behavioral biases that lead people to do wrong.

Tunnel vision

Setting and achieving goals is important, but single-minded focus on them can blind people to ethical concerns. 

When Enron offered large bonuses to employees for bringing in sales, they became so focused on that goal that they forgot to make sure they were profitable or moral. We all know how that ended. 

Source: Muel Kaptein

The power of names

Setting and achieving goals is important, but single-minded focus on them can blind people to ethical concerns. 

When Enron offered large bonuses to employees for bringing in sales, they became so focused on that goal that they forgot to make sure they were profitable or moral. We all know how that ended. 

Source: Muel Kaptein

The power of names

When bribery becomes "greasing the wheels" or accounting fraud becomes "financial engineering," unethical behavior can seem less bad.

The use of nicknames and euphemisms for questionable practices can free them of their moral connotations, making them seem more acceptable.

Source: Muel Kaptein

Social bond theory

In large organizations, employees can begin to feel more like numbers or cogs in a machine than individuals.

When people feel detached from the goals and leadership of their workplace, they are more likely to commit fraud, steal, or hurt the company via neglect.

Source: Muel Kaptein

The Galatea effect

Self image determines behavior. People who have a strong sense of themselves as individuals are less likely to do unethical things.

Alternatively, employees who see themselves as determined by their environment or having their choices made for them are more likely to bend the rules, as they feel less individually responsible.

Source: Muel Kaptein

Time pressure

In a study, a group of theology students were told to preach the story of the good Samaritan, then walk to another building where they'd be filmed. Along the way, they encountered a man in visible distress.

When given ample time, almost all helped. When they were deliberately let out late, only 63 percent helped. When encouraged to go as fast as possible, 90 percent ignored the man.

Source: Muel Kaptein

Acceptance of small theft

There are dozens of small temptations in any workplace. Stationary, sugar packets, and toilet paper frequently go home with employees.

Those small thefts are ignored. So are slightly larger ones, like over-claiming expenses or accepting unauthorized business gifts. It doesn't take long for people to begin pushing those limits.

Source: Muel Kaptein

Self-serving bias

Few people believe they're average; most think they're smarter and more ethical than those around them.

That can lead to feelings of injustice. If somebody else gets a promotion, it's not down to their performance and capacity, it must be something else. Those feelings, and overestimation of other's biases can lead to unethical behavior.

Source: Muel Kaptein

Conspicuous consumption

Extreme wealth, or environments that reflect it can lead to unethical behavior. For employees, seeing excessive bonuses or perks that they don't show leads to feeling of injustice and jealousy which may lead them to unethical behavior.

Research by Kathleen Vohs shows that the mere presence of money makes people more selfish, as they focus on success and individual needs over other factors.

Source: Muel Kaptein

The Pygmalion effect

The way that people are seen and treated influences the way they act. When employees are viewed suspiciously and constantly treated like potential thieves, they are more likely be thieves.

This effect occurs even in employees who aren't initially inclined towards unethical behavior.

Source: Muel Kaptein

Environmental influence

Employees reflect their environment. If corruption, major or minor, is a part of their workplace, they become blind to its occurrence and its possible costs.

A study incorporating participants from a variety of countries found that the less transparent and more corrupt the participant's country of origin, the more willing they were to accept or give bribes.

Source: Muel Kaptein

Reactance theory

Rules are designed to prevent unethical behavior, but when they're seen as unjust or excessive they can provoke the opposite reaction.

This is known as reactance theory. People resent threats to their freedom, and they often manifest that resistance by flouting certain rules.

Source: Muel Kaptein

Obedience to authority

Obedience to authority is ingrained in our culture and workplace. When someone in a position of authority asks an employee to do something unethical or illegal, they can find it difficult to say no.

It's easier to justify bad behavior, and when people see themselves as an instrument of another's wishes, they feel less responsible.

Source: Muel Kaptein

The blinding effect of power

Powerful people appear more corrupt because they're caught more publicly. However, a recent study found that when given power, people set ethical rules much higher for others than they do themselves.

If someone is influential and sets rules for others, they can begin to see themselves as morally distinct from their employees, and not subject to the same rules.

Source: Muel Kaptein

Broken window theory

Former New York City Mayor Rudy Giuliani popularized the "broken window theory" when he led a sweeping effort to lower crime rates. The idea was to crack down on smaller, petty crimes, and clean up the city to create some semblance of order, and discourage larger crimes.

When people see disorder or disorganization, they assume there is no real authority. In that environment, their threshold to overstepping legal and moral boundaries is lower.

Source: Muel Kaptein

The free-rider problem

"If nobody else steals stationary, the company won't notice if I do. If nobody else in the area pollutes, they won't notice if a tiny bit of waste is released."

Positive and ethical behavior can sometimes engender an opposite reaction. If total damage is limited, people feel as though they can take more liberties.

Source: Muel Kaptein

The foot in the door

When a figure in authority asks someone to skirt the rules, they want to seem like a team player.

Giving in modifies self perception. A person may begin to think of themselves as extremely loyal, someone who gets things done. In that frame of mind, they may be willing to do increasingly unethical things.

Source: Muel Kaptein

Winner take-all competition

In situations where there is a clearly-defined winner and loser, people are more likely to cheat. They desperately want to avoid the financial and reputational costs of losing.

The people most likely to cheat may not even be those farthest behind, but rather those who are just short of their goal.

Source: Muel Kaptein

Cognitive dissonance and rationalization

When people's actions differ from their morals, they begin to rationalize both to protect themselves from a painful contradiction and to build up protection against accusations.

The bigger the dissonance, the larger the rationalization, and the longer it lasts, the less immoral it seems.

Source: Muel Kaptein

Problematic punishments

Attaching fines or other economic punishments to immoral behavior can have an undesired effect. Once something is cast in those terms, it loses its moral connotation and becomes an entirely different calculation.

Rather than being about whether something is right or wrong, it becomes an economic calculation about the likelihood of getting caught versus the potential fine.

Source: Muel Kaptein

Lack of sleep and hypoglycemia

The rewards of unethical behavior are something people struggle with on a daily basis. As simplistic as it sounds, people who are hungry or tired have less self control.

Research has found that tired participants asked to complete math tasks significantly over-report correct answers. While being tired or hungry won't make someone embezzle, it leaves them more open to moments of weakness.

Source: Muel Kaptein

Escalating commitment

Big thieves usually start out as small thieves. One way such actions become a slippery slope leading to ever greater misconduct is the feeling that there's no way out.

This has been seen in recent rogue traders like Jerome Kerviel and Kweku Adoboli. They got bonuses for taking big risks, but when those risks became big losses, they took even larger risks to try and make up for them.

Source: Muel Kaptein

The induction mechanism

People compare their present behavior to what they've done in the past. Another way people slide down the slope of unethical behavior is to stop seeing that behavior as bad.

As the unethical becomes routine, the extremely unethical, once unthinkable, enters the realm of possibility.

Source: Muel Kaptein

Market and shareholder pressure

Former Citigroup CEO and Chairman Charles Prince once said, "As long as the music is playing, you've got to get up and dance."

He was referring to the leveraged buyout market in 2007. Before the collapse, there was intense pressure for managers to join in on the huge and risky profits, despite the evident bubbliness of the market.

Source: Muel Kaptein

The compensation effect

Sometimes people, having been moral and forthright in their dealings for a long time, feel as if they have banked up some kind of "ethical credit," which they may use to justify immoral behavior in the future.

An experiment from Nina Mazar and Chen-Bo Zhong found that people who have just bought sustainable products tend to lie and steal more afterwards than those who bought standard versions.

Source: Muel Kaptein

Negative consequences of transparency

Transparency usually serves to reduce unethical behavior, as it increases the likelihood of getting caught. Experiments examining the publication of conflicts of interest have found a perverse effect.

The effect comes from something called "moral licensing." If a conflict of interest is publicly disclosed, it can seem less problematic, as if it has been agreed that it's all right. That can lead people to indulge their bias.

Source: Muel Kaptein

Bad communication

Issues of corruption and morality are often treated as black and white, wrongdoers are badly punished, and gray areas are not discussed.

That can lead to an environment where rather than sounding out ideas that border on unethical, people push and test their limits.

Source: Muel Kaptein

The pressure to conform

Nobody likes being a nuisance. In order to fit in with a group, people do things they might not otherwise. That can lead them to ignore abuses for the sake of peace or unity and go along with questionable decisions.

Source: Muel Kaptein

Opting to Blow the Whistle or Choosing to Walk Away

By  Alina Tugend

· Sept. 20, 2013

· WHISTLE-BLOWERS have been big news lately — from Chelsea Manning, formerly known as Pfc. Bradley Manning, to Edward J. Snowden. Yet, for most people, the question of whether to expose unethical or illegal activities at work doesn’t make headlines or involve state secrets.

· But that doesn’t make the problem less of a quandary. The question of when to remain quiet and when to speak out — and how to do it — can be extraordinarily difficult no matter what the situation.

· And while many think of ethics violations as confined to obviously illegal acts, like financial fraud or safety violations, the line often can be much blurrier and, therefore, more difficult to navigate.

· According to the Ethics Resource Center, a nonprofit research organization, the No. 1 misconduct observed — by a third of 4,800 respondents — was misuse of company time. That was closely followed by abusive behavior and lying to employees.

· The findings were published in the organization’s 2011 National Business Ethics Survey, which interviewed, on the phone or online, employees in the commercial sector who were employed at least 20 hours a week. It has been conducted biannually since 1994.

· But offensive behavior that creates a hostile work environment, although often not thought of as unethical behavior, is the leading reason people leave their jobs, said Patricia J. Harned, president of the center. “Abusive and intimidating behavior by supervisors and managers creates a toxic work environment.”

· So does lying to employees. Lester, who asked that I use only his first name to avoid possible legal issues, worked at a global consulting company for about three years, earning high performance ratings. At one point, he said, he accidentally learned that his manager had deliberately lied to deny him a promotion opportunity. Lester spoke to the hiring manager to no avail, and because the company had a strong ethics program — including a specific “no retaliation policy” and a hot line to report ethics complaints — he reported the situation.

· An investigation found no wrongdoing, and although Lester appealed the findings, no action was taken against the manager. That is when he says the retaliation began.

· “All my direct reports were taken away from me and I was given the most difficult projects with the least resources,” he said. “A whole series of things happened, which were unlikely to be a coincidence.”

· After about eight months of this, he decided to leave.

· Lester’s experience may be the reason the misconduct most often seen is not the one most often reported. According to the Ethics Resources Center report, which is sponsored by major corporations like Wal-Mart and Northrop Grumman, less than half of those who observed a boss lying to employees reported it.

· On the other hand, while only 12 percent said they had witnessed someone stealing from the company, almost 70 percent of those who saw such activity reported it.

· One of the difficulties in cases like Lester’s is that no law has been broken. True whistle-blowing, according to Stephen M. Kohn, a lawyer and executive director of the National Whistleblowers Center, is when people report seeing or experiencing something at their company that is against the law, rather than cases in which employees feel mistreated, but nothing illegal has occurred.

· It appears, however, that an increasing number of employees are willing to come forward in both types of cases. More people are using their companies’ ethics procedures to report misconduct, and more people are filing whistle-blower claims.

· Mr. Kohn, whose organization refers potential whistle-blowers to lawyers, said there had been a 30 percent increase in the number of people requesting referrals over the last 18 months, which comes to about 1,500 requests a year.

· He also said the quality of complaints — with more documentation and from higher-level employees — had increased.

·

· Some of this is because of legislation rewarding whistle-blowers for coming forth and protecting them against retaliation. The most prominent of those is the Dodd-Frank Act, which passed in 2010. Under that act, the Securities and Exchange Commission oversees the Office of the Whistleblower, which in 2012 alone received 3,001 tips.

· It may seem counterintuitive that reporting bad behavior would go up during the recession and afterward, when people fear for their jobs. Ms. Harned said, however, that one explanation was that employees were less able to change jobs, so they might be more willing to try to change a negative work culture.

· “Historically, when the economy is good, companies take more risks and focus more on the bottom line,” Ms. Harned said. “They’re not talking about ethics as much.”

· But, just as reporting is on the rise, so is retaliation. More than one in five employees interviewed said they experienced some sort of reprisal when they reported misconduct, ranging from being excluded from decision-making activities and getting the cold shoulder from other employees to being passed over for promotion.

· That is almost double the number who said they were retaliated against in the 2007 study.

· Even more alarming, in 2009, 4 percent of those who said they experienced reprisals for reporting wrongdoing cited physical threats to themselves or their property. In 2011, that rose to 31 percent.

· “Whistle-blowing does threaten cultures and individuals, even when companies say they want it and think they want it,” said Kirk O. Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University.

· And, he said, it’s very easy to rationalize that an action — say, denying a promotion — is not actually payback for reporting misconduct, but because the worker isn’t a team player.

· So, while it’s important to expose unethical behavior, it’s also necessary to be very clear why you’re doing it — and how to do it right.

· “A good thing to ask yourself is, ‘Why am I doing this? Am I trying to help the company or just get someone in trouble?’ ” said Stuart Sidle, director of the Industrial-Organizational Psychology program at the University of New Haven.

· You need to ensure that you’re not talking yourself out of taking an ethical stand, nor talking yourself into reporting something for the wrong reason, Professor Hanson said.

· “Have someone you can bounce dilemmas off who has similar values,” he said. “To make sure you’re not rationalizing not doing anything, and to make sure there’s a genuine problem — someone to help you be strong but also to test your realities.”

· In general, employees should follow the proper channels, like addressing the issue with the person directly supervising the supposed culprit, said John M. Thornton, a professor of accounting ethics at Azusa Pacific University.

· Along the same lines, think very hard before going public.

· “I question someone trying to report externally before reporting internally,” Mr. Sidle said. It’s too easy, now, he said, to put up a video of bad behavior on YouTube or lash out on Facebook without ever speaking with the people who might be willing to resolve the problems.

· On the other hand, don’t shy away from reporting bad behavior because you don’t want to be seen as that worst elementary school insult — a tattletale.

·

· “You don’t want a culture of tattling, but you do want a culture of telling if something is harming the company and the community,” Professor Sidle said.

· And companies need to be specific in how they talk about ethics, he added.

· “It’s useless just to talk about unethical behavior,” he said. “Everyone is against fraud. Everyone is against disrespectful behavior, but how is it defined? Leadership has to give examples. If someone asks you to backdate something because the client asked, it’s unethical, even if it’s commonly done.”

· And, finally, whistle-blowers should know that most cases are not settled in their favor. “This may be attributable to injustices in the system, or lack of merit or proof of the alleged wrongdoing,” Professor Thornton said.

· For good or for bad, most of us will never face the decisions that Mr. Manning and Mr. Snowden have. But that doesn’t mean our choices — to confront or to ignore — aren’t important.

· “Some will always cheat on their expense reports,” Professor Hanson said. “Some will never cheat. Most of us are in the middle. It’s a constant struggle to do the right thing.”

·

Employee Behavior Standards in the Workplace

by Audra Bianca

In many organizations, employees must meet standards of professional behavior as a condition of employment. These standards help an organization create a respectful working environment for everyone. If you learn the standards that govern your workplace, you can ensure that your behavior is acceptable and prepare to succeed in your job. Acceptable behavior is also required for acceptance into the workplace culture.

Code of Conduct

Organizations provide a code of conduct to explain which behaviors are and are not permitted by employees. In addition, employees can be required to acknowledge this code by signing an agreement upon employment. Employees who violate the standards face consequences through a standard policy, such as a progressive discipline system, which has grave consequences for the most serious violations. Also, employees may get a warning for the first occurrence of a less-serious violation, but they would get a more severe consequence for another occurrence of the same behavior. Progressive discipline gives employees a chance to change their behavior and continue employment.

Interpersonal Communication

Some examples of unacceptable behavior may be included in a policy containing employee behavior standards, but an employer will usually include language such as "not limited to" to allow for disciplining employees who have committed other unacceptable behaviors. Employers will not tolerate inappropriate ways that employees treat others at work, including co-workers, superiors, customers and visitors. Examples are bullying, harassment, intimidation, belittling others, undermining a person's performance by withholding information, spreading gossip to hurt a person's reputation, or making offensive gestures or comments. These kinds of behaviors could include communication through technologies such as cell phone messages, text messages, social media posts and emails.

Administrative Behavior

Other forms of behavior that could impact an organization relate to the misuse of power or resources. Managers have many expectations governing their use of authority. Managers shouldn't give preference to people for unfair reasons, such as employing friends or relatives. They also shouldn't claim expenses for items such as mileage, business lunches, airfare or hotel accommodations if they were really personal expenses. All employees should be honest in communications regarding employees and delivering information to customers. Without a policy that covers how employees can abuse power or resources, some employees will find unethical ways to benefit from their employment in an organization.

Revising the Rules

Every organization has an opportunity to get employees involved in rewriting the rules of professional behavior. Employees may want to include behaviors such as bullying or social media gossip that were not addressed in current behavior standards. Employers may address employee concerns by adding separate policies for some areas of professional behavior. For example, an employer could write a separate policy to address bullying, travel reimbursement, outside employment, financial disclosure or acceptable use of technology. Special policies provide details that will help employees better understand how to conform to an employer's expectations.

Common Ethical Workplace Dilemmas

by Don Rafner; Updated June 30, 2018

Most people spend a great deal of their weekdays at their offices or job sites. It's not surprising, then, that employees face ethical dilemmas there. Several of these dilemmas pop up on a regular basis. With some common sense and a bit of analysis, employees can resolve common workplace dilemmas without losing their jobs or bringing harm to their employer.

Conducting Personal Business on Company Time

Because employees tend to spend so much of their weekday hours on the job, they often are tempted to conduct personal business on company time. This can include setting up doctor's appointments on company phone lines, making vacation reservations using their employer's computers and Internet connections or even making phone calls for a freelance side business while on company time.

At first glance, this ethical dilemma is fairly clear: It is an abuse of your employer to conduct personal business on company time. But there are shades of gray here. What if your spouse calls to tell you that your children are ill? Is it OK for you to schedule a doctor's appointment? A good rule of thumb is for an employee to check with his manager or human resources supervisors to clarify what counts as an actionable offense in the company.

Taking Credit for Others' Work

Employees often work in teams to create marketing campaigns, develop new products or fine-tune services, yet rarely does everyone in a group contribute equally to the final product. If three members of a five-person team did all the work, do those three members demand to receive proper credit while pointing out that two members of the team did not pull their weight?

This is a thorny question. If employees single out their co-workers in a negative light, it could foment resentment. The same thing could happen, however, if all employees accept equal praise even though only a select few did the real work. The best way to resolve this ethical dilemma is to not let it happen. Team members should insist that all employees perform specific tasks to help complete a project.

Harassing Behavior

Employees often don't know what to do if they see one of their co-workers harassing another employee, either mentally, sexually or physically. Employees may worry for their jobs if they attempt to report a superior for harassment. They may fret that they'll be labeled a troublemaker if they report co-workers who display inappropriate behavior toward other employees.

First, understand what constitutes harassment. According to the Equal Employment Opportunity Commission, an occasional comment, slight or incident -- unless it's very serious -- isn't characterized as harassment. It's when the pervasiveness of such actions creates a work environment that would seem hostile, intimidating or offensive to most reasonable people.

The best way to resolve this ethical dilemma rests with the staff members who develop the company's employee handbook. It is their job to include specific language that spells out that employees won't be punished for reporting the harassing behavior or other inappropriate actions of their co-workers, and to make sure everyone knows and understands the policy and the consequences of violating it.

Stealing on the Job

We all know embezzling from the company -- taking money and hiding it by altering the records -- is against the law. But what about taking home an occasional box of staples?

Just because the supply room is well stocked with boxes of everyone's favorite pens doesn't mean it's okay for employees to help themselves to a pack for home. It may seem like a small thing, but when every employee takes something, it does add up against company profits. It is stealing, and an astute office manager will notice things going missing too fast.

Falling profits affect everyone in the company, even future raises, bonuses or layoffs. Regardless how small, taking something without paying for it is unethical.

Proactive Employers

Many unethical workplace behaviors can be stopped early on or before they start by employers letting the staff know what the company considers to be unethical. Someone who takes home a few pens may not think of that as stealing until it's pointed out to them. Many people don't realize their attempts at humor could be offensive to others, or that hopping on the internet is an abuse of company time because "everyone does it."

It's not enough to put it in the company handbook. Even supplying copies to everyone assumes they will read it cover to cover. At minimum, employers should send a memo marked "Important" to everyone spelling out common practices that the company considers unethical as well as the possible consequences for them. Ask each employee to send a reply email saying they received and read the memo. Better still, schedule a mandatory mini-training session where everyone hears the news, word for word. Take attendance, and record the session for those who were absent or anyone who wants to review the information at any time.

Read:

The Business Ethics Workshop (2012) Washington, DC: The Saylor Foundation

Chapter 7: Employee's Ethics: Making the Best of the Job You Have as You Get from 9 to 5 (pages 277-314)