Ethical Decision Making and Ethical Leadership Essay

To improve h one and unless(a)st end making in chore, one mustiness first understand how one-on-ones shake off honest ends in an ecesisal environment. Too ofdecade it is assumed that individuals in organizations mention respectable decisions in the same way that they make respectable decisions at home, in their family, or in their mortalal lives. Within the context of an organisational scat group, however, few individuals have the freedom to nail d admit honourable jazzs independent of organizational pressures.ETHICAL ISSUE INTENSITYThe first step in honourable decision making is to recognize that an ethical issue requires an individual or work group to withdraw among several actions that various stakeholders inside or outside the firm will ultimately evaluate as account world power or wrong. honest issue intensity, then, can be defined as the relevance or spellance of an ethical issue in the eyes of the individual, work group, and/or organization. it is in- psyche and temporal in character to accommodate determine, beliefs, needs, perceptions, the special characteristics of the situation, and the personal pressure prevailing at a particular bottom and time.Ethical issue intensity conjectures the ethical sensitivity of the individual or work group that faces the ethical decision making fulfill. Research suggest that individuals argon subject to six spheres of influence when confronted with ethical choices the workplace, family, devotion, intelligent system, community, and profession and that the level of importance of each of these influences wiil vary depending on how important the decision maker perceives the issue to be. Additionally, the individuals sense of the situations moral intensity increase the individuals perceptiveness regarding ethical problems, which in wind reduces his or her intention to unethically.Moral intensity relates to a persons perception of social pressure and the harm the decision will have on othe rs. The perception of ethical issue intensity can be influenced by managements use of reward and punishments, corporate policies, and corporate values to sensitize employees. In the words, managers can affect the breaker point to which employeesperceive the importance of an ethical issue done positive and/or negative incentives.INDIVIDUAL FACTORSWhen great deal need to lick ethical issues in their daily lives, they often base their decisions on their own values and principles of expert or wrong. The commonplacely learn these values and principles finished the socialization process with family members, social groups, and religion and in their formal procreation. Research regarding individual meanss that affect ethical awargonness, judgment, intent, and behavior include gender, education, work experience, nationality, age, and locale of control.Education, the number of years spent in pursuit of academic knowledge, is also a significant factor in the ethical decision-making p rocess. The important thing to remember about education is that it does not reflect experience. cream experiences is defined as the number of years within a specific job, occupation, and/or industry. Generally, the more education or work experiences that one has, the better he/she is at ethical decision making.Nationality is the legal race between a person and the country in which he/she is born. Age is another(prenominal) individuals factors that has been look fored within business ethics. In other words, the older you are, the more ethical you are. However, recent research suggest that there is in all likelihood a more complex relationship between ethics and age.Locus of control relates to individual differences in relation to a generalized beliefs about how one is affected by inbred versus away events or reinforcements. In other word, the concept relates to where people view themselves in relation to power. Those who cerebrate in external control see themselves as going wi th the flow because thats all they can do. They guessd that the events in their lives are do to uncontrollable forces. They occupy what they want to achieve depends on luck, chance, and muscular people in their company. Conversely, those who believe in internal control believe that they control the events in their lives by their owneffort and skill, wake themselves as masters of their destinies and trusting in their capacity to influence their environment.ORGANIZATIONAL FACTORSAlthough people can and do make individual ethical choices in business situations, no one operates in a vacuum. Indeed, research has established that in the workplace the organizations values often have greater influence on decisions than a persons own values. Ethical choices in business are most often made jointly, in work groups and committees, or in conversations and discussions with coworkers. The outcome of this learning process depend on the strength of each person personal values, the opportunities he or she has to behave unethically, and the exposure he or she has to others two behave ethically or unethically.A corporate culture can be defined as a set of values, beliefs, goals, norms and ways of solving problems that members of an organization share. An important circumstances of corporate, or organizational, culture is the companys ethical culture. Whereas corporate culture postulates values and rules that prescribe a wide range of behavior for organizational members, the ethical culture reflects whether the firm also has an ethical conscience.Ethical is a function of many factors, including corporate policies on ethics, top managements loss loss leadinghip on ethical issues, the influence of coworkers, and the opportunity for unethical behavior.Obedience to authority is another aspect of the influence that significant others can exercise. Obedience to authority helps to explain why many employees resolve business ethics issues by simply following the directives as sup erior.OPPORTUNITYOpportunity describes the civilises in an organization that limit or permit ethical or unethical behavior. Opportunity results from conditions that either provide rewards, whether internal or external, or fail to erectbarriers against unethical behavior. Example of internal rewards include feelings of thoroughlyness and personal worth generated by performing altruistic acts. External reward refer to what an individual expects to receive from others in the social environment. Rewards are external to the individual to the degree that they bring social approval, status, and esteem.An example of a condition that fails to erect barriers against unethical behavior is a company policy that does not punish employees who accept monstrous gifts from clients. Opportunity relates to individuals immediate job context where they work, whom they work with, and the nature of the work.Opportunity also comes from knowledge. Major fumble observed among employees in the workplace include lying to employees, customers, vendors, or the earth or with holding essential information from them. The opportunity for unethical behavior cannot be eliminated without aggressive enforcement of codes and rules.BUSINESS ETHICS EVALUATIONS AND INTENSIONSEthical dilemmas involve problem-solving situations in which decision rules are often vague or in conflict. The results of an ethical decision are often uncertain, no one can always tell us whether we have made the right decision.An individuals intentions and the final decision regarding what action he or she will take are the last steps in the ethical decision-making process. When the individual intention and behavior are inconsistent with his or her ethical judgment, the person may feel guilty.Guilt or uneasiness is the first sign that an unethical decision has occurred. The beside step is changing ones behavior to reduce such feelings. This switch can reflect a persons values shifting to fit the decision or the person changing his or her decision type the next time a similar situations occurs. For those who begin the value shift, the following are the universal justifications that will reduce and finally eliminate guilt 1.I need the paycheck and cant afford to block up right now.2.Those around me are doing it so why shouldnt I? they believe its all right 3.If I hadnt have done this, I may not be able to vex a good reference from my boss or company when I leave. 4.This is not such a big deal, given the emf benefits 5.Business is business with a different set of rules6.If not me, someone else would do it and get rewardThe road to success depends on how the business person defines success. The success concepts drives intentions and behavior in business either implicitly or explicitly. USING THE ETHICAL DECISION-MAKING FRAMWORK TO IMPROVE ETHICAL DECISIONS It bears repeating that it is hopeless to tell you what is right or wrong alternatively, we are attempting to prepare you make in framed et hical decisions. Although this chapter does not moralize by telling you what to do in a specific situation, it does provide an overview of representative decision-making processes and factor that influence ethical decisions.The framework is not a guide for how to make decisions but is think to provide you with insights and knowledge about typical ethical decision making processes in business organizations. Because it is unfeasible to agree on normative judgments about what is ethical, business ethics scholars developing descriptive models have instead focused on regularities in decision making and the various phenomena that interact in a changing environment to produce predictable behavioral patterns.THE ROLE OF LEADERSHIP AN A CORPORATE CULTERELeadership the ability on authority to guide and direct others toward achievement of a goal, has significant impact on ethical decision making because leader have the power to motive others and enforce the organizations rules policies as well as their own viewpoints.LEADRESHIP STYLE INFLUENCE ETHICAL DECISIONSLeadership styles influence many aspects of organizational behavior, including employees acceptance of and adherence to organizational norms and values. Styles that focus on building strong organizational values among employees domiciliate to shared standards of conduct. The ethical leadership concept is not only for chief operating officers, boards of directors, and managers but can alsobe fellow employees. Ethical leadership by the CEO requires an understanding of the firms hatful and values, as well as the challenges of responsibility and the risk in achieving organizational objectives. Six leadership styles that are base on emotional intelligencethe ability to manage ourselves and our relationships effectivelyhave been identified by Daniel Goleman.1.The imperative leader demands instantaneous obedience and focuses on achievement, initiative, and self-control. Although this style can be very effective du ring propagation of crisis or during a turnaround, it otherwise creates a negative climate for organizational performance. 2.The authoritative leaderconsidered to be one of the most effective stylesinspires employees to follow a vision, facilitates change, and creates a strongly positive performance climate. 3.The affiliative leader values people, their emotions, and their needs and relies on friendship and trust to promote flexibility, innovation, and risk taking.4.The democratic leader relies on participation and teamwork to reach collaborative decisions. This style focuses on communication and creates a positive climate for achieving results. 5.The pacesetting leader can create a negative climate because of the high standards that he or she sets. This style works best for attaining quick results from highly motivated individuals who value achievement and take the initiative. 6.The coaching leader builds a positive climate by developing skills to foster long-term success, delega ting responsibility, and skillfully issuing ambitious assignments.Transactional leaders attempt to create employee satisfaction through negotiating, or bartering, for desired behaviors or levels of performance. Transformational leaders get through to raise employees level of commitment and to foster trust and motivation.HABITS OF STRONG ETHICAL LEADERSIn particular, we believe that ethical leadership is based on holistic thinking that embraces the complex and challenging issues that companies face on a daily basis. Ethical leaders need both knowledge and experience to make the right decision. Strong ethical leaders have both the courage and the most complete information to make decisions that will be the best in the long run. Strong ethical leaders must sustain to their principles and, ifnecessary, be ready to leave the organization if its corporate governance system is so flawed that it is undoable to make the right choice.Ethical Leaders Have Strong Personal CharacterThere is general agreement that ethical leadership is highly unlikely without a strong personal character. The question is how to determine or develop a moral person in a corporate environment. White, a leash authority on character exploitation, believes the focus should be on ethical reasoning rather than on being a moral person.Ethical Leaders Have a Passion to Do righteousnessThe passion to do right is the glue that holds ethical concepts together. Some leaders develop this trait aboriginal in life, whereas others develop it over time through experience, reason, or spiritual growth. They often cite old(prenominal) arguments for doing rightto keep. society from disintegrating, to alleviate human suffering, to advance human prosperity, toresolve conflicts of interest fairly and logically, to praise the good and punish the guilty, or just because something is the right thing to do.Ethical Leaders Are ProactiveEthical leaders do not hang around waiting for ethical problems to arise. The y anticipate, plan, and act proactively to avoid potential ethical crises.44 One way to be proactive is to take a leadership role in developing effective programs that provide employees with focal point and support for making more ethical choices even in the face of considerable pressure to do otherwise.Ethical Leaders Consider Stakeholders InterestsEthical leaders consider the interests of and implications for all stakeholders, not just those that have an economic impact on the firm. This requires acknowledging and monitoring the concerns of all veritable stakeholders, actively communicating and cooperating with them, employing processes that are respectful of them, recognizing interdependencies among them, avoiding activities that would harm their human rights, and recognizing the potential conflicts between leaders own role as corporatestakeholders and their legal and moral responsibilities for the interests of other stakeholders.Ethical Leaders Are procedure Models for the O rganizations Values If leaders do not actively serve as role models for the organizations core values, then those values become nothing more than lip service. correspond to behavioral scientist Brent Smith, as role models, leaders are the primary influence on individual ethical behavior. Leaders whose decisions and actions are contrary to the firms values send a contract that the firms values are trivial or irrelevant. Firms such as Countrywide fiscal articulated core values that were only used as window dressing. On the other hand, when leaders model the firms core values at every turn, the results can be powerfulEthical Leaders Are Transparent and Actively Involved in Organizational Decision fashioning Being transparent fosters openness, freedom to express ideas, and the ability to question conduct, and it encourages stakeholders to learn about and comment on what a firm is doing. Transparent leaders will not be effective unless they are in person involved in the key decisions that have ethical ramifications. Transformational leaders are collaborative, which opens the door for transparency through interpersonal exchange. Earlier we said that transformational leaders in dumb commitment and respect for values that provide guidance on how to deal with ethical issues.Ethical Leaders Are Competent Managers Who Take a holistic View of the Firms Ethical Culture Ethical leaders can see a holistic view of their organization and therefore view ethics as a strategic component of decision making, much like marketing, information systems, production, and so on. Although his company is called Waste Management, CEO David P. Steiner is as attached to renewable vitality as just about anyone working for a multibillion dollar business. Steiner was selected as one of the 100 Most Influential People in Business Ethics by the Ethisphere Institute in 2007, and his company, Waste Management, was chosen as one of the Worlds Most Ethical Companies in 2008. object lesson study Ty co International Leadership CrisisINTRODUCTIONOn September 12, 2002, national television showcased Tyco Internationals former chief executive officer (CEO) L. Dennis Kozlowski and former chief financial officer (CFO) Mark H. Swartz in handcuffs after being arrested and aerated with misappropriating more than $170 one thousand jillion from the company. They were also accused of stealth more than $430 one one thousand thousand million million through fraudulent sales of Tyco melodic phrase and concealing the information from shareholders. The two executives were charged with more than thirty counts of misconduct, including grand larceny, enterprise corruption, and falsifying business records. Another executive, former general pleader Mark A. Belnick, was charged with concealing $14 million in personal loans. Months after the initial arrests, charges and lawsuits were still being filedmaking the Tyco scandal one of the most notorious of the early 2000s.TYCOS HISTORYFounded in 196 0 by Arthur J. Rosenberg, Tyco began as an investment and holding company focused on solid-state science and energy conversion. It developed the first laser with a sustained beam for use in medical procedures. Rosenberg later on shifted his focus to the commercial sector. In 1964, Tyco became a publicly traded company. It also began a series of rapid acquisitionssixteen companies by 1968. The expansion continued through 1982, as the company sought to fill gaps in its development and distribution networks. Between 1973 and 1982, the firm grew from $34 million to $500 million in consolidated sales.THE improvement OF DENNIS KOZLOWSKIIn 1975, armed with a degree in accounting, Dennis Kozlowski went to work for Tyco, following brief stints at SCM corp and Nashua Corporation. He soon found a friend and mentor in then CEO Joseph Gaziano. Kozlowski was impress by Gazianos lavish lifestylecompany jets, extravagant vacations, company cars, and country club memberships. However, Gazianos r eign ended abruptly in 1982 when he died of cancer. Gaziano was replaced by John F.Fort III, who differed sharply in management style. Where Gaziano had been extravagant, Fort was analytical and thrifty. His goal was to increase profits for shareholders and cut the extravagant spending characterizing Gazianos tenure, and Wall Street responded positively to Tycos new direction. Kozlowski, who had thrived under Gaziano, was forced to adapt to the abrupt change in leadership.Adept at crunching numbers, Kozlowski focused on helping to achieve Forts vision of putting shareholders first. Kozlowskis largest acquisition was Wormald International, a $360 million global fire-protection concern. Integrating Wormald proved problematic, and Fort was reportedly unhappy with such a large purchase. Fort and Kozlowski also disagreed over rapid changes made to Grinnell. Kozlowski responded by lobbying to convince Tycos board of directors that problems with Wormald were a bump in the road and that the firm should continue its outline of acquiring profitable companies that met guidelines.KOZLOWSKIS TYCO EMPIREAfter Forts departure, Dennis Kozlowski, then 46, found himself helming Tyco International. With a new lifestyleparties and multiple homes in Boca Raton, Nantucket, Beaver Creek, and New York Cityand an aggressive management style, he appeared to be following in the footsteps of his mentor, former CEO Joseph Gaziano. Kozlowski knew Tyco from the bottom up, and stated that he was determined to make it the greatest company of the next century. Among other things, he recognized that one of Tycos major shortcomings was its credence on cyclical industries, which tend to be very sensitive to economic ups and downs. In 1997, Kozlowski acquired ADT Security Services, a British-owned company located in Bermuda. By structuring the deal as a reverse takeover, wherein a public company is acquired by a private company so as to avoid the lengthy process of going public, Tyco acquired a global presence as well as ADTs Bermuda registration.The majority of members had served for ten years or more, and they were familiar with Kozlowskis management style. As directors, they were responsible for protecting Tycos shareholders through disclosure of questionable situations or issues that might seem unethical or inappropriate. Despite this, after the arrests of Kozlowski and Swartz, investigations open the following troubling relationships among theboards members 1.Richard Bodman invested $5 million for Kozlowski in a private stock fund managed by Bodman. 2.Frank E. Walsh, Jr. received $20 million for helping to arrange the acquisition of CIT sort without the other board members knowledge. 3.Walsh also held controlling interest in two firms that received more than $3.5 million for leasing an aircraft and providing pilot services to Tyco between 1996 and 2002.4.Stephen Foss received $751,101 for supplying a Cessna Citation aircraft and pilot services. 5.Lord Michael Ashcro ft used $2.5 million in Tyco funds to purchase a home. Meanwhile, Jeanne Terrile, an analyst from Merrill Lynch who worked for Tyco, was not impressed with Kozlowskis activities and Tycos performance. Her job at Merrill Lynch was to make recommendations to investors on whether to buy, hold, or sell specific stocks. After Terrile wrote a negative review of Tycos rapid acquisitions and mergers and refused to upgrade Merrills position on Tycos stock, Kozlowski met with David Komansky, the CEO of Merrill Lynch.THE FALL OF DENNIS KOZLOWSKI AND OTHERSIn early 2002, Kozlowski announced Tycos split of its four divisions into independent, publicly traded companies Security and Electronics, Healthcare, apprise Protection and Flow Control, and Financial Services. Kozlowski stated, I am extremely proud of Tycos performance. We have build a 5 great portfolio of businesses and over the five years ended September 30, 2001, we have delivered net profit per share growth at a compounded annual rat e of over 40 percentage and industry-leading operating profit margins in each of our businesses. During this same period, we have increased annual free immediate payment flow from $240 million in 1996 to $4.8 billion in fiscal 2001.Nonetheless, even with this performance, Tyco is trading at a 2002 P/E multiple of 12.0x, a discount of almost 50 percent to the S&P 500. Also in 2002, the New York State Bank Department observed large sums of money locomote in and out of Tycos accounts. What made this unusual was that the funds were being transferred into Kozlowskis personal accounts.political science discovered that Kozlowski had sought to avoid around $1 million in New York state import taxes. In September of that year, Dennis Kozlowski and Mark Swartz, who also had resigned, were indicted on thirty-eight felony counts for allegedly stealing $170 million from Tyco and fraudulently selling anadditional $430 million in stock options. Among other allegations, Kozlowski was accused of t aking $242 million from a program intended to help Tyco employees buy company stock.REBUILDING AN EMPIREAfter Kozlowskis resignation, Edward Breen replaced him as CEO. The company filed suit against Dennis Kozlowski and Mark Swartz for more than $100 million. The SEC allows companies to sue insiders who profited by buying and selling company stock within a six-month period. Tyco stated, To hold him accountable for his misconduct, we seek not only full payment for the funds he misappropriated but also punitive damages for the ripe harm he did to Tyco and its shareholders.