ETHICAL AWARENESS AND DECISION MAKING

INTRODUCTION
A business without ethics is a business at risk.
Almost daily, headlines in newspapers trumpet stories of companies facing multimillion
dollar fines, criminal prosecutions, and bankruptcy. Behind many of these headlines is
the tale of an employee who made the wrong decision, who didnt report suspected
wrongdoing, or who failed to recognize an ethical dilemma.
Advances in technology and todays ease of travel have literally allowed businesses to
span the globe. We all can think of friends or relatives who work in far-flung satellite
offices of large companies, who are "on the road" or "in the field" for long stretches of
time, or who telecommute from home. Because of these developments in how
businesses operate, decision-making in most organizations has become more and more
decentralized. Despite this, employees are still expected to make decisions responsibly
and correctly, based on the companys particular values and credo.
Unfortunately, in many cases, the correct decisions are far from obvious. Additionally,
employees often must choose between conflicting interests and values in making their
decisions. The "real time" manner in which businesses operate nowadays and the
demand to accomplish more in less time make it even more difficult to make correct
decisions. In these types of situations, when the employee has no real guidance, it is
critical that he or she possess ethical decision-making skills.
This Handbook is intended to help employees answer these difficult questions.
Specifically, this Handbook discusses business ethics, ethical decision making, and
provides a brief and general overview of some of the concepts of business ethics and an
understanding of why ethical business practices are important, both for employees and
companies. However, it does not provide any advice or guidance as to what to do in any
given situation. Additionally, this Handbook does not provide any specific advice
regarding the steps a company should take to develop a comprehensive ethics program.

UNDERSTANDING BUSINESS ETHICS

The term "business ethics" may sound like an oxymoron -- a contradiction in terms, like
"jumbo shrimp." Its not. Business ethics is an important tool to help employees handle
situations at work.
In a simple world, all business decisions would be easy. Employees would do whatever
brings in more revenues and profits. Yet, in the real world, every employee must balance
demands that sometimes conflict and must consider the impact that their decisions have
on others.
Sometimes, laws and regulations help employees make the right decision. For example,
a manufacturing company could save substantial time and money if it disposed of its
hazardous waste in a nearby river, rather than hiring a disposal company to complete the
task properly. However, environmental pollution laws prohibit dumping hazardous waste
into rivers, so the decision is a simple one -- if its against the law, a company cant do it.

In other situations, no laws or regulations exist to guide the employee toward the "right"
decision. Here, business ethics is particularly important because in the absence of laws
or regulations, it can guide the employees decision-making process.
I.

What Is Business Ethics?

In simple terms, business ethics is the process of using appropriate values when
trying to make a difficult decision at work.
Ethics is the study of what is good and right for people. It asks the question,
"How should I act, especially when my actions directly or indirectly affect others?"
Business ethics is the application of ethical principles and methods of analysis to
business.
Here are some other sentences that help to understand what ethics means:

Ethics is about how people ought to treat each other.

Ethics is about not causing unjustifiable harm.
Ethics is about doing only what you would be willing to have done to you.
Ethics is about following appropriate values that determine our duties
and responsibilities.
Ethics is about our conscience and our living up to it.
Ethics is about treating people with respect.

Example 1: Joan is a general manager of Global PetroChem/Peru, a subsidiary

of Global Operations, Inc., a U.S. corporation. Since taking over Global
PetroChem/Peru three years ago, Joan has not been back to the United States.
In her capacity as a general manager, Joan is privy to confidential information -she knows that Global Operations, Inc. is planning to make layoffs within Global
PetroChem. Kiki, a geologist in Global PetroChem and one of Joans good
friends, asks Joans advice about her career prospects at the company because
she is planning to sign a contract for the purchase of her first house.
Joan has a difficult decision to make. On the one hand, as a general manager,
she has a duty of loyalty to her company. On the other hand, Joan also has a
duty of loyalty to Kiki, her friend. These two values are conflicting. What should
Joan do in this situation? What process should she use to resolve this dilemma?
Business ethics and ethical decision-making skills can help Joan. In this case,
Joan decided to consult with the human resources manager at Global
Operations, Inc., who told her that Kikis career prospects were good in the
company. Joan decided to say nothing, except to congratulate Kiki when she
bought her house. Joan was sensitive to her dilemma and found a way to resolve
it in an ethical way.
II.

Ethics at Work
We are continually forced to make decisions that test our character and
conscience. These decisions can run the gamut from mundane to critical -"Should I tell my wife what I really think of her dress?" to "Should I tell my life
insurance agent that I smoke two packs of cigarettes a day?"

In the workplace, the decision-making stakes can be higher, and the confusion
can be greater. When faced with character and conscience-testing decisions at
work, were often not sure what the correct answer is. Sometimes, we may not
know if our employer has a rule or policy that governs the situation. Most
employees arent lawyers, so they dont generally know how the law may affect
their decision. In still other cases, we may know our companys rule or policy, but
may disagree with it because it makes us feel uncomfortable or we dont
understand the purpose.
This is when business ethics comes into play. Business ethics -

focuses on reasoning,
helps explore options, and
helps apply the right values to decisions.

Example 2: Patricia is a sales representative for Global Toys, Inc. One of her
largest customers, Tony, is placing an order for a chain of retail department
stores. "I want to make sure we have a good supply of Spaceman Joe, your new
item. I know it will be a hot toy for Christmas," he says. Patricia knows that Global
has had production and delivery problems with Spaceman Joe. She also knows
that Tonys order will insure her year-end bonus.
Business ethics helps Patricia reason to a decision. Based on her companys
values of honesty, accountability, and customer satisfaction, she shares all her
information with Tony to help him make an informed purchasing decision.
Example 3: Bobs manager believes Bob landed a major new customer and
publicly praises him at a company sales meeting. In fact, another employee who
is no longer in sales was primarily responsible for landing the customer. What
should Bob do?
Business ethics helps Bob explore his options. Bob decides that he would not
feel right if this information were published in the company newspaper, so after
the meeting he corrected his manager, who thanked him for the information.
Example 4: Angela, director of a chain of nursing homes, is dismayed to learn
that Linda, a social worker and one of her employees, has made a racist joke
during a recent dinner for a local political candidate. Angela immediately places
Linda on paid administrative leave while she investigates. "What about my rights
of free speech?" Linda complained.
"What about the importance of our company values?" Angela answered. "To be
effective, our social workers must be -- and be perceived to be -- impartial and
fair. Racist comments undermine those goals." Business ethics helps Angela
apply the right value to her decision to subsequently fire Linda.
III.

Myths About Business Ethics

Over the years, several myths have become associated with the topic of
business ethics. Each of these myths dismisses business ethics as unimportant.
Beware of these myths, because they have no credence.
A.

Myth 1: Ethics has nothing to do with business

In 1983, The Wall Street Journal called business ethics an oxymoron.

The number of prominent scandals made it seem that no businessperson
was, or could be, ethical. One prevailing philosophy was that business
should focus only on increasing its profits and that its only obligation was
to obey the law.
Now, those holding this philosophy are fewer in number. Public opinion
has shifted. Today, society expects businesses to pay more attention to
their ethical and social responsibilities. Furthermore, many CEOs are
proclaiming publicly that an ethical business culture is essential to
business success.
B.

Myth 2: Business ethics is a managerial fad

Though business ethics has experienced a recent resurgence in
popularity, its not new. The Code of Hammurabi, enacted nearly four
thousand years ago, reflects that rulers attempted to establish honest
prices. Philosophers such as Aristotle and the religious writers who
crafted the Old and New Testaments and the Koran often referred to
ethics in relation to money and poverty.
More recently, citizens have debated the ethics of child labor, conflicts of
interest, monopolistic business practices, and the environment. Important
legal cases against well-known companies have brought ethical scandals
to public attention as the press has become a more intense watchdog for
business ethics failures.

C.

Myth 3: Acting ethically involves just following the law

If you follow the law youll be acting ethically, unless of course the law is
unethical. But following the law is the minimum thats required. None of
us wants to live in a society in which every action or decision is
contained in a law or rulebook. We prefer and need independent thinking
and freedom of action.
Acting ethically means doing the right thing, sometimes when choosing a
course of action that is not required by the law or when the law is silent.
It means doing more than the legal minimum and more than considering
others interests as well as your own.
Example 5: Curtis is a claims adjuster for Global Surety Co., a national
property insurance company. He also works with his brother-in-law on
weekends as a carpenter. He is assessing the damage to a customers
home after a severe storm when a homeowner across the street
approaches him. "My porch was damaged during the storm last night. Do
you know anyone who can repair it?"
Assume there is no law or company regulation that applies directly to this
situation. Here, Curtis has to balance his companys interest in avoiding
conflicts of interest with his own desire to help his brother-in-law. Curtis
wasnt completely sure what his company would like him to do, so he
asked for the homeowners name and telephone number. "Let me check
and get back to you," he said.

D.

Myth 4: Ethics only involves choosing between wrong and

right
Acting ethically means not causing needless harm or violating the law.
That, however, is just the minimum. Acting ethically also means that we
must sometimes balance two "rights," or, in other words, two positive
values.
Example 6: Chris, a senior technician for Global Computer Networks,
Inc., has just reconfigured the computer set-up and checked the hard
drives for Mr. Marcus, a nursery owner.
Mr. Marcus is grateful for Chriss help. "Great, Chris. I really appreciate
you coming here so fast. A lot of my landscapers order from us directly
on line these days, so we were in a tough situation."
"Not at all," Chris replies. "Glad we could help."
"Here, Chris, take these out to your truck with you. These four
rosebushes were left over from an order yesterday. I know you said you
just bought a new house. Id like you to have them."
Before loading the rosebushes into the bed of his truck, Chris should
pause and think, because Mr. Marcuss gesture, as innocuous and
friendly as it seems on the surface, could be problematic. Accepting this
gift may violate a company policy. Under certain circumstances, it might
be illegal. Here are some questions Chris should consider -

Does his employer have a policy about accepting gifts?

Would Mr. Marcus be insulted if he didnt accept the rosebushes
as gifts?
What would his company think of Chriss conduct if he accepted
Mr. Marcuss gift?

What are Chriss alternatives? Should he reject the bushes? Accept

them? Was there another possible course of action?
E.

Myth 5: Ethics shouldnt be taught at work

Most people believe that theyre ethical. And, most of them may be right.
But consider the following questions -

Are you young, a senior, or in between?

Is this your first job?
Do you think youll retire soon?
Were you raised in an extroverted family, or a quiet one?
What is your religious background?
What kind of culture were you raised in?
Have you ever faced illness, hardship, or financial reversals, or
has your life always been easy?
Did you ever work for a boss you respected? One you disliked?
Do you learn best by reading and looking things up, or by
discussion?

People are different, and may respond differently to the same set of facts
or circumstances in a common workplace. Each of us brings a set of life
experiences to the workplace, shaped by our age, our family, our
schooling, and even the part of the world we grew up in. During our
working life, our priorities and values change as we gain more
experiences. Few people act the same way at age 65 as they did at age
25.
Yet in the workplace, we are all thrown together. Consequently, in the
workplace employees have different ideas about whats the "right thing"
to do. They can view the same situation differently and, therefore,
resolve that situation in different ways. At times, people dont think from
an ethical point of view at all. Thats why it is helpful for employers to
provide opportunities to discuss and resolve ethical situations at work.
IV.

The Consequences of Not Understanding Ethics

Sometimes we think that only complex, serious decisions made by senior
managers have the potential to harm companies. This is wrong. While senior
managers can be just as guilty of unethical actions as nonsenior employees, it is
often nonsenior employees who have the most difficult decisions to make and
who are most likely to harm the company.
Example 7: Jerry works as a mechanic for Global Bus Lines. Jerry works the
night shift, which he enjoys, because there are no other employees around to
distract him from his work. One evening, Jerry is repairing the brake system on
Bus No. 405. After he disassembles the front brakes, he notices that both rotors
are shot. Since he orders parts for Global, Jerry knows that the shop has no
rotors in inventory. Jerry fills out a requisition for new rotors and then decides to
take a pair of old rotors out of the disposal bin and install them on Bus No. 405.
Jerry plans to remove the old rotors the next evening and replace them with new
rotors, after they arrive. The next morning, while in operation, Bus No. 405
crashes, injuring 14 passengers.
Jerry had no idea that he was in an ethically challenging situation or that his
actions could impact his company, himself, and the public. Acting with only the
best intentions, Jerry caused a great deal of harm. The goal of ethical decision
making is to help employees recognize situations like this. In some cases
employees will need to reason their way to a correct decision on their own. In
other cases, such as Jerrys, employees may want to take the time to consult
others before reaching a conclusion, even if it means that the bus will be late.

V.

Failure to Question, Report, or Act

When we know of, or are asked to do something that doesnt seem right, we are
faced with an ethical situation. Failure to question, report, or act in such
situations can place our employers, others, and ourselves at risk.
Example 8: Rico is President of Global Airlines. At 4 a.m., Rico receives a frantic
phone call from one of his managers -- the manager tells him that 15 minutes
ago, Globals flight 231 fell from the sky, killing every passenger on board.
Already shocked by the loss of life aboard the flight, three days later, Rico is
flabbergasted when he receives a letter from 42 mechanics at the companys
maintenance base. They inform Rico that they had been pressured, threatened,

and intimidated into cutting corners on safety and that their supervisor directed
them to put unserviceable parts back on airplanes. Ricos life is about to get even
more complicated -- in a few months, Global will face investigations from the
Federal Aviation Administration, the National Transportation Safety Board, the
U.S. Attorney, the Federal Bureau of Investigation, and outside experts, as well
as lawsuits from crash victims families.
The failure of the 42 mechanics to report that Global was cutting corners on
safety had horrible results. Had these employees engaged in an ethical decisionmaking process, this situation could have been avoided.
A.

Failure to act ethically

Knowing that our actions as employees are illegal or capable of
producing harm should automatically trigger the ethical red flag,
thereby influencing how we act.
Example 9: In 1996, Global Mediterranean Cruise Lines pleaded guilty
to dumping hazardous chemicals in coastal waters, violating federal
pollution laws. The cruise line paid a $9 million fine for illegal dumping,
obstruction of justice, engaging in a fleet-wide conspiracy, and had
promised to stop these practices. By continuing the illegal dumping, the
cruise line reportedly saved tens of thousands of dollars per ship. In
1999, the cruise line was forced to pay an $18 million fine. When the
second fine was announced, the company said it had made a mistake.
This was no mistake. Global Mediterranean Cruise Lines knew that its
illegal dumping was illegal and that it was capable of producing harm. It
simply chose not to act ethically and paid the price for not doing so.

B.

Failure to recognize an ethical issue

Unfortunately, far too many people do not recognize ethically sensitive
situations when they should. A primary goal of business ethics is to raise
the level of ethical awareness.
Example 10: The city of Los Diablos wants to host the 2008 Summer
Olympics. In December 2000, KXXX Channel 6 in Los Diablos breaks
the news that the citys International Olympic Organizing Committee paid
$713,000 in benefits to 11 individuals, including six relatives of IOC
members who were voting on the citys bid to host the 2008 Summer
Games. This revelation caused worldwide publicity and embarrassment
to the city and its committee. Subsequent investigations by federal, state,
and international organizations revealed that the city had given more
than $1 million to visiting IOC members, despite a rule prohibiting the
practice. The members of Los Diablos International Olympic Organizing
Committee who made the payments all claimed that they had no idea
that their conduct would be seen as improper.
An understanding of ethical decision making would have enabled the
members of the committee to recognize that they were in the midst of an
ethically sensitive situation before they made the payments.

C.

Failure to seek guidance

Recognizing ethical situations and doing whats right is not always easy.
However, it is never wrong to seek guidance to make sure you do whats
right. Consulting others and partnering with other individuals before you
make a decision is always a good idea. In some cases it can save your
career.
Example 11: Frank is the human resource manager at Global
Aerospace, an international company. He is visiting GAs turbine division,
meeting with its local managers to discuss personnel matters. "I dont
understand why you have such turnover here," Frank said. "No other GA
division has this problem. Look at this. In a 15-month period, 70
employees discharged and 82 suspended for various problems. Are you
hiring troublemakers?"
"No," replied one of the managers. "Thats the hard part. These were
good employees who just made bad decisions. In some cases they
thought what they did was in the companys best interest. In other cases,
they blamed pressure to meet a goal, or not knowing where to get help."
"Well, you need some training in business ethics, emphasizing the
importance of seeking guidance from our various support departments,"
said Frank. "We cant afford to lose good employees these days."

VI.

The High Costs of Ethical Failure

If employees fail to act ethically, the consequences can consist of more than
harsh discipline or lost jobs. All we need to do is to look at a few real-life
examples of large judgments or settlements to realize that the costs of ethical
lapses can be high -

Securities firm: $2 billion, for improper and misleading sales practices.

Retailer: $210 million, for improper credit card collection practices.
Oil company: $176 million racial discrimination settlement after tape
recordings of improper conversations among its top executives were
released.
Conglomerate: $100 million antitrust fine for price-fixing and jail time for
executives.
Conglomerate: $37 million fine for customer and environmental fraud,
including lying to inspectors.
Healthcare company: $187 million in fines and penalties for health care
billing fraud.
Automobile manufacturer: $34 million to settle a government
investigation of pervasive sexual harassment.
Healthcare company: $250 million to settle a government investigation of
illegal health care billing practices.
Manufacturer: $500 million in a vitamin price-fixing case.

In some cases, the ethical lapses were not even actions of deliberate harm, but
simply inattention or failing to question or consult others.

WHY FOLLOWING THE LAW ISNT ENOUGH

Historically, especially in heavily regulated industries, companies that have violated the
law have initiated programs in response to the violations. Understandably, the approach
of these companies, after the violations occurred, focused on teaching what the law is.
Many companies believe that having compliance programs is sufficient to prevent
wrongdoing. However, such an approach is inadequate today. To understand why, it is
important to know the difference between compliance and ethics, and how they are
related.
I.

What Is Compliance?
Compliance provides the policies and rules for the operation of businesses.
Compliance focuses on obeying concrete laws and policies.
Example 12: Global Refining Co. converts crude oil to gasoline. In the refining
process, Global produces a lot of waste, some of which is hazardous. The
primary focus of Globals compliance department is on environmental laws, to
make sure that Global does nothing to violate them -- such as disposing of waste
improperly or spilling waste.
Many companies focus only or too heavily on rules that support their business
practices, featuring a "check the box" mentality and a reactive style of
compliance management. Such companies react to what courts or regulatory
agencies tell them to do or not to do.
A better approach is to proactively establish proper values to guide actions and
to train employees in ethical decision making so they will be equipped with the
tools to deal with problems that are not a matter or law or policy. The results in
companies that focus only on compliance all too often defeat the very purpose of
such programs, discouraging people from asking questions or making
suggestions about subjects that are not covered in the rules.
A compliance-based culture emphasizes following procedures rather than
understanding the procedures purposes. In addition, such a culture emphasizes
monitoring violations rather than promoting commitment to doing whats right.
In defense of compliance, some managers believe that "ethics" is too vague and
"slippery." These managers believe that, in the face of business pressures,
employees will ignore what they learned in an ethics training course and will do
what they have to do to get the job done. These managers also believe that its
most important to teach employees how to follow the law and then document that
the company has done so.
Compliance programs often cover -

financial disclosures,
procurement procedures,
hazardous waste disposal and reporting, and
wage and hour laws.

Compliance usually will -

focus on legal vs. illegal activity,



identify risks,
provide answers in unambiguous situations, and
penalize wrongdoing.

Compliance will not -

II.

develop ethical reasoning skills,

communicate values, or
provide assistance for gray areas or ethical dilemmas.

How Does Ethics Differ From Compliance?

Ethics focuses on what we should do when we are navigating the "gray areas,"
where there are no hard and fast rules. Ethics often involves a choice of two or
more courses of action, both of which may be legal or even desirable. These
dilemmas generally require thought and consideration and cant be resolved just
by consulting a rulebook.
The purpose of business ethics initiatives is to promote a "values-based" culture
in which compliance becomes part of a larger shared commitment to do whats
right.
Companies with values-based cultures support individuals to make the right,
although sometimes difficult, decision. These companies recognize that not all
decisions can be captured in rules. They acknowledge that rules help guide us,
but their application is limited. Therefore, we need not only a commitment to the
values that the rules attempt to support, but also the ability to decide in an ethical
manner when the rules alone are not enough.
Example 13: Georgina is a customer service manager for a local telephone
company. She and her husband are having dinner one night at a local restaurant
when Georgina notices one of her supervisors, Tom, at the bar. A friend joins
Tom and the two move to a nearby table. As time passes, Tom becomes louder,
and Georgina can overhear his conversation. Tom boisterously tells the story of a
local real estate owner who had appealed to the telephone company to give him
extra telephone lines for his apartment building, ahead of others on the waiting
list. "And as soon as I get my next drink, Ill tell you what he offered me in
exchange for installing those lines," Tom shouts. Georgina is concerned, but
doesnt know what to do.
In this situation, there are no rules or laws to assist Georgina. She knows that
Tom is most likely violating company values, including one that respects
customer confidentiality. But she is not sure of her responsibility or obligation to
intervene in this situation. After all, Tom is a supervisor, and they are both on
personal time. Ethical decision making can assist her in this situation.

III.

Ethics and Compliance -- Important Allies

Compliance and values programs should complement one another in guiding
workplace behavior.
Many companies with compliance programs have found that once they begin to
educate their employees about laws and regulations, its not long before
employees start asking questions and seeking guidance. Thats why the best

training programs include ethics. These programs teach employees how to make
decisions for themselves when the answers to their questions are not
necessarily spelled out. Independent decision making is especially critical
because some rules and laws may not be obvious, or they seem illogical.
In short, compliance and ethics programs are interdependent. Neither can fully
succeed without the other.
Example 14: Matthew works for Globalmart, a national chain of large retailing
stores. He has just been promoted to regional manager for six states in the
Southeast. "Visit every store," his boss told him. "Concentrate on three things -employee turnover, merchandise display, and inventory shortage. Dont get
distracted with other things right now."
As Matthew is leaving a Globalmart store in Georgia, he notices an employee
dumping a large barrel over a ditch by the far edge of the parking lot. Matthew
stops his car and watches, unsure of what the employee is doing. On one hand,
he is in a hurry to get to his next store, and he has covered the three priority
subjects on this visit. He also knows that if the barrel contains unsafe materials,
there are specific company regulations that cover how they should be handled.
On the other hand, as a company manager, he should investigate what the
employee is doing, even if it makes him late for his next visit and does not
concern his three priorities.
He is also aware that the store he has just visited is operating with a temporary
manager, since the regular manager has recently been transferred. While there
are rules that apply to this situation, it is Matthews responsibility as an ethical
leader to stop and challenge a situation that does not look right to him, and to
follow it through until he is satisfied. Matthews understanding of business ethics
raised his awareness of potential ethical problems, helps him reason through his
options, and encourages him to take action.

INDIVIDUAL ETHICS AND INSTITUTIONAL ETHICS

Some companies assume that the subject of ethics applies only to individuals and not to
organizations. Based on this assumption, these companies believe that if they hire good
people, then they will be an ethical organization. They also believe that all unethical
actions in business are simply the result of bad people -- rotten apples in the corporate
barrel.
It is true that unethical actions by individuals can damage an entire organization -institutional integrity depends on individual integrity. However, this is not the whole story
of business ethics. Ethical people can be brought down by serving in a bad
organization, just as people with questionable integrity can be uplifted, or at least held in
check, by serving in an organization with clear values.
I.

The Dynamics Between Individuals and Institutions

Individuals gain direction and purpose by belonging to and acting as part of
organizations. We are all part of social cultures that are formed around common
goals, shared beliefs, and collective duties. In the worst cases, these
organizations are gangs or criminal enterprises based on negative values. In the
best cases, these organizations uplift and inspire us through their positive values.

A 1997 study discovered that 60% of workers feel pressure to act unethically or
illegally on the job. Their transgressions ranged from deceiving customers to
cutting corners on quality. Among the factors that contributed to workplace
pressure were poor internal communications and poor leadership.
Example 15: Patrick is promoted from stock clerk to an assistant in the meat
department of his local supermarket. His job is to package cuts of meat in trays
and seal and label them. His manager is explicit about how to do this. "Put the fat
side down in the tray," he said, "and show the best side of the meat. We want it
to look as attractive as possible." Patrick does as he is told.
The following summer Patrick works at a different supermarket, again in the meat
department. He is no longer a novice and shows his manager that he knows how
to package meat. "Who taught you to do it like that?" his manager asks. "You do
it that way again and youre fired. This doesnt follow our value of honesty. Make
sure if theres fat on the cut of meat, its visible in the package for the customer.
We dont want her taking it home, discovering it, and then complaining."
A.

Institutional programs affect individuals

Business ethics is about organizations developing structures and
procedures that encourage ethical behavior.
Wrongdoing occurs not only because businesses hire unethical people,
but also because businesses give little thought to developing
organizational structures in which individuals can act ethically.
Lets look at what some companies have done to support both individual
integrity and institutional integrity. Here are some findings from a study of
Fortune 1000 companies, outlining the specific steps organizations have
taken to develop ethics programs -

98% address ethics and conduct issues in formal documents.

78% have separate codes of ethics.
22% also use other means to communicate ethics, such as
letters, bulletins, videos, posters, and speeches.
54% have designated a company executive to deal with ethics
issues.
30% have stand-alone separate ethics departments.
20% train managers in ethics every year.
40% train managers in ethics every few years.
35% train all employees every few years.
70% have standardized procedures for dealing with unethical
conduct.
51% have a hotline or helpline for obtaining advice and reporting
concerns.

These figures demonstrate the growth of business ethics initiatives in

major American corporations, and more growth has occurred since these
statistics were gathered.
B.

The goal -- balance autonomy and authority

Some believe that ethical decisions are made, or should be made, only
by top management. Not only is this approach unworkable in todays
decentralized business environment, but it also denies employees the
chance of being an active part of the ethical fabric of the company.
Autonomy means self-directing freedom and independence. Authority
means the power to command behavior. Managing the tension and
interdependence between individual autonomy and institutional
authority is the fundamental challenge of establishing an ethical culture.
Autonomy and authority both contribute to an ethical culture.
Individual autonomy provides -

recognition of an ethical right of individual freedom,

a mechanism to critique and change organizational policy,
decentralized decision making, and
encouragement of spontaneity and innovation.

Institutional authority, on the other hand, provides -

definition of rules and responsibilities for everyone,

preservation and unification of core organizational values, and
creation of a framework for guiding decision making.

The key to balancing autonomy and authority is the development of

ethical leadership among all employees by enhancing their ethical
decision-making skills. By encouraging employees to act as ethical role
models, they will also begin to acquire the skills of ethical leadership.
This will allow them to succeed in an environment that supports their
autonomy while providing proper guidance through codes, rules, and
policies.

THE DIFFERENCE BETWEEN ETHICS AND VALUES

Sometimes the words "ethics" and "values" are used interchangeably. You might see, for
example, a sentence like, "Our values are our ethical commitments." In fact, the concepts
of ethics and values are different, although they are related.
I.

Values
Actually, "values" is a morally neutral term. Individuals can have unethical values,
such as racism or self-centeredness. Values are beliefs that help to shape our
attitudes and actions. Sometimes our values conflict with each other.
Sometimes we dont know what our values really are until they are revealed in
our actions. The values we act on determine our character.
Organizations have values. Some are stated. Others are unstated. Sometimes
conflicts arise when an organizations practices and policies work in opposition
to its values.
Example 16: Global Brokerage, Inc. pays its salespeople on a commission basis
and strongly urges them to make their monthly quota. Therefore, it might be
difficult to uphold a value that puts the best interests of the customer first

because a Global Brokerage stockbrokers commission is primarily based on the

number of transactions he or she executes. For that reason, a stockbroker might
have more incentive to make trades than to treat the customer right.
II.

Ethics and Values

Ethics come into play when, on one hand, we choose between right and wrong
or, on the other, when we weigh two or more right courses of action. It is the
process of using appropriate principles of decision making to establish which
values should guide our behavior. The goal of ethical thinking is to arrive at and
act on the right values for a particular situation. Keep in mind that ethical
decision making cannot take place without an existing framework of values to
guide the decisions.
Example 17: Global Corp. allows its employees to keep all frequent flier miles
earned on business trips, but decides on a case-by-case basis whether other
travel-based rewards belong to the company or the employee. Two of Globals
core values are "honesty" and "accountability." Susan, a Global employee, is
bumped from several flights during a lengthy business trip and receives a $500
gift certificate from the airline as a result. Should Susan disclose the certificate to
Global or keep it as payment for her inconvenience without disclosing it?
Globals core values of honesty and accountability require that Susan disclose
the certificate to her company. Although Global might allow her to keep the
certificate, she is ethically obliged to raise the issue and discuss it with her
employer. Failing to do so would violate both her duty of honesty and her duty to
account for assets to which her employer might have a claim.

III.

Why Values?
Values have an important place in the business world because of the way society
is changing. The features of todays business world support institutions having
values-driven management. Here are a few characteristics of todays businesses
-

IV.

Diversity. Individuals of different ages, religions, and gender may have

different ideas about appropriate ways to behave in an organization,
depending upon their perspective and life experiences.
Globalization. Individuals from diverse cultures may have different
reactions to various questions or issues.
Decentralization. Individuals are increasingly left on their own to make
decisions because of fewer levels of management at some employment
sites.
Virtual work. With so many employees out in the field, working from
home, or at other diverse locations, common organizational standards of
behavior are difficult to learn.
Strategic alliances. Individuals may work with others who are not fellow
employees, but with others who are, instead, customers, suppliers, or
even competitors.
Self-regulation. Government regulation is being replaced by voluntary
industry and company codes.

Whose Values?

Most companies start construction of an ethical decision-making framework by

first considering some basic values that are appropriate to the economic
structure of the company, the community, and the industry. Because it usually
provides a basic framework from which to work, the law usually is a logical place
to begin.
Examining legal prohibitions leads an organization to define whats ethical and
valued. As a result, a company often does more than simply what is legally
required. However, it is not easy to settle on a finite list of basic core values.
Organizations may want to start with the obvious ones, such as the moral
obligation not to cause unjustifiable harm, to be fair, to treat people with respect,
and to be honest. After choosing these values, the company can then consider
how they apply in a specific work situation. Additionally, top management acting
alone should not select the organizations values. Rather, the process should be
opened to company-wide input, and the values should be repeatedly tested
throughout the company to ensure that employees embrace them.
Example 18: GlobalSpace, Inc., a major contractor for the National Space
Exploration Administration (NSEA) , works with government administrators,
astronauts, and engineers to prepare its spacecraft for an important launch.
NSEA is planning to send seven astronauts into space for two weeks of critical
scientific experiments. It is the first space launch in a new presidents term and
he and his new cabinet are planning to watch the launch in person.
GlobalSpaces primary corporate value is "safety first." Its chairman and senior
managers remind its engineers that NSEA -- and the country -- are counting on
GlobalSpace for its unique technical expertise about rocketry and space shuttle
design and reliability.
However, in the frantic weeks prior to the space launch, the GlobalSpace
engineers on the scene are hearing a different message. "This launch must go as
planned," becomes the slogan. Two days before the lift-off, several GlobalSpace
engineers become concerned about impending cold weather. Now the engineers
face a conflict -- the company's core value is "safety first," which might conflict
with the recent message that the launch must go as planned. "What good is a
corporate value if it is ignored when it's most needed?" one engineer asks.
This engineer asked the right question. To resolve this conflict, Global's
engineers must rely on the primary corporate value -- safety first. They should
bring the safety concerns to the attention of the necessary people in
management so that the launch does not proceed until all safety issues have
been resolved.
V.

Conflicting Values
Sometimes an employees values may conflict with his or her employers values.
In other cases, employees and organizations may share the same values, but
interpret and apply those values differently.
Accordingly, even when an organization is specific about its core values, it must
clarify them often to eradicate confusion.
Example 19: Marys supervisor, Cheryl, saw Mary passing out flyers in the
company cafeteria. When Cheryl asked her about it, Mary explained, "Barbara

Jones works in the next building. I know her from bowling. I got an e-mail this
morning that her son was in a car crash in Colorado over the weekend. Shes
flying out to see him and is going to try to bring him home. Evidently hell need
lots of therapy and special equipment, as well as aides and therapists. Our
department decided to have a fundraiser to help Barbara at the VFW hall next
weekend. Barbaras been a good friend to all of us, and we wanted to spread the
word to the entire company. Its all a volunteer effort."
Cheryl says, "Mary, I have a few problems with this. Its against company policy
to solicit like this, even if its volunteer. You like Barbara, but what if another
employee has a hardship and you dont like him or her so much? What if
someone complains about your advocacy for Barbara? And does Barbara know
about this? Perhaps shed rather have her family situation kept confidential."
Who is right?
You might agree that Mary was right to try to help Barbara. One of her personal
values is caring for others. But this value might conflict with her organizations
values in this particular situation -

Fairness: If an employee solicits help for Barbara, what about all other
employees who face hardship?
Respect for others: Barbara may prefer that her personal life be kept
private.
Accountability: Company rules prohibit solicitation of any kind, without
exceptions for good causes.

If you were Mary and received an e-mail about Barbaras son, what would you
have done? What could the company have done to make your decision easier?
You may conclude that Mary should have consulted her supervisor before
printing the flyer if she had any confusion about whether the company would
support volunteer efforts on behalf of Barbara. Then there would be no
misunderstanding about what was the right course of action.
VI.

Can Values Change?

Some organizations go to great lengths to determine their "core" values. They
do the right thing by continually testing their values against real-life examples
drawn from their experiences. When they settle on the primary values, they
usually announce them with fanfare and incorporate them in a wide range of
materials.
However, too often, organizations fail to realize their core values must be living.
They need to be revisited and the commitment to them renewed. Some
organizations incorrectly believe that their values, once articulated, are rigid and
not subject to change. However, only when values actually guide ethical decision
making in the real world do organizations really know if they are appropriate.
Industries, competitors, company direction, the regulatory environment, and
internal processes all change. A companys core values must be able to change
correspondingly.
Example 20: Global Diagnostics, a semiconductor company, has a distinguished
reputation for ethics, winning prestigious national awards for its program in 1991
and 1994. Yet, in 2000, it embarks on a massive effort to eliminate rules and

policies and distill its voluminous policy book to a short codification of the
companys core values. After months of focus groups, consultation and drafts,
the company ends up with just three words: integrity, innovation, and
commitment.
Example 21: GlobalSafe, a national private security company, adopts its first
ethics code in 1980 and revises it three times by 1990. In 1991, however,
GlobalSafes chairman decides the code should be revised every year. The
company now embarks on a comprehensive process each year, soliciting
suggestions from its 14,000 employees. In 1999, for example, the company
received 304 employee suggestions for changes. Every September the previous
code of ethics expires and the new, revised, improved code is signed and
adopted by every employee in the company.

HOW TO DEVELOP ETHICAL SKILLS

The subjects of the next four topics can best be illustrated by imagining an ethical
development pyramid, which helps us to understand the role of business ethics at work.
At the bottom, or most basic level, is ethical awareness. Before you can figure out the
right course of action, you first need to see and to understand the ethical dilemma you
are facing. The next level is ethical reasoning. You need to understand how to think
through an ethical problem and reach a decision before you can move onto the next level
of taking ethical action -- that is, behaving ethically by putting your decision into practice.
Finally, by consistently making sound ethical choices and acting on them successfully,
you will become an ethical leader at work, fulfilling your ethical responsibilities.
I.

Ethical Awareness
The first step in behaving ethically on the job is to recognize ethical dilemmas.
Some of the reasons for ethical blindness -- or a version of ethical blindness one
might refer to as ethical insensitivity -- include misguided ideas like -

"Its not my job."

"My company wants me to do this."
"Everyone does it."
"No one will know."
"I deserve this."
"I have to go along with this."
"I need my paycheck."
"No one understands what I face."
"No one cares."
"Its no big deal."

Sometimes, employees fail to recognize an ethical conflict because of old bad

habits, defense mechanisms, time constraints, or competitive pressures. In those
instances, employees must learn to overcome these misguided ideas or habits,
to recognize an ethical dilemma, and then to resolve the dilemma.
Every employee has faced an ethical dilemma at some point in his or her working
life. Some situations are relatively straightforward. When the "right" and the
"wrong" decisions are clear, employees should always make the right decision.
Thats choosing to be ethical.

However, choosing to be ethical does not solve every ethical problem. Not all
solutions to problems can be found by checking a law, regulation, or rule for the
right answer. Deciding on a course of action when there is a conflict between
positive values or duties, rather than a choice between right and wrong, can be
more difficult.
Take a moment and think about situations that have presented ethical problems
for you. After you do, the characteristics of these situations start to emerge -

The situation is complex.

The situation has many facts.
Some facts may be open to differing interpretations.
The situation may have important consequences.
Individuals may hold different points of view.
There are more than two options.
The situation may be emotionally difficult.
The facts may change over time.
A law, regulation or rule is of little help.
The situation may involve two positive values.
There may be pressure from outside forces.

Example 22: Emily, the manager of an Ohio branch of a national consumer

products company, has just received a phone call from Scott, the companys
information technology manager.
Scott: "Emily, Im looking at a list that says two of your employees are among the
top ten Ohio employees who get the most e-mail messages. One other employee
sends the biggest messages. Another employee is visiting pornographic web
sites. I have good evidence that at least thirty percent of the e-mails coming from
your office are not related to work."
Emily: "Whats the problem? We both know employees use e-mail just like the
telephone now."
Scott: "Bandwidth, for one. Theyre overwhelming our network. Plus, theyre not
being as productive as they could be."
Emily: "Scott, how do you know this? Plus, I know we dont have a company
policy on this type of thing."
Scott: "I have software programs that tell me all this, including what messages
theyve been receiving and sending."
Emily: "Frankly, Im surprised to learn youre looking at personal messages."
Scott: "This is part of my function, Emily. For one thing, Ive spotted security
holes and prevented hackers from using our network. Right now I need you to
handle your employees. This has got to stop."
Emily concludes the phone call. What should she do next?
By now youve probably concluded that Emily has an ethical dilemma --



There is no rule covering this situation.

The views of her employees may differ from Scotts.
The situation is emotional.

She has several courses of action she could take.

She must balance several values -- privacy of employees, the interests of the
company, her authority as a manager, the autonomy of her employees, her
support of Scotts job function, her desire to prevent future harm, and her desire
to retain valued employees.
II.

Ethical Reasoning
The second critical step or level in developing ethical skills is to undertake
ethical reasoning.
There is no one right way to make an ethical decision. There are many
problem-solving methods that employees can use, including the ones we explain
below. The important guideline to remember is to choose a technique that works
best for you.
Lets now look at one decision-making technique.

III.

Ethics "Quick Test"

Some difficult situations can be resolved by using a simple ethics "quick test."
The ethics "quick test" is comprised of four questions.
A.

First, will the action violate any laws or policies of the company?
If the answer is "yes," dont do it. If the answer is "no," proceed to the next
question. If the answer is "Im not sure," seek assistance.

B.

Second, could my decision to take the action negatively impact others?

If the answer is "yes," dont take the action. If the answer is "no," proceed to the
next question. If the answer is "Im not sure," seek assistance.

C.

Third, will others feel I owe them something --or they owe me something--in
return if I take the action?
If the answer is "yes," dont take the action. If the answer is "no," proceed to the
next question. If the answer is "Im not sure," seek assistance.

D.

Fourth, could my decision appear improper?

If the answer is "yes," dont take the action. If the answer is "no," proceed to a
decision. If the answer is "I dont know," seek assistance.
Heres an ethical dilemma to which you can apply the ethics "quick test."

Example 23: Adam, a newly hired construction supervisor for a national

homebuilder, receives an invitation to a three-day seminar on "Energy
Efficiency," sponsored by an association to which his company belongs. The
seminar offers two days of presentations and one day of golf for the member and
a guest. The association pays for meals and lodging. Adam makes an
appointment to discuss it with his boss, Neil.
Neil reviews the invitation and the schedule of activities. How should Neil handle
Adams request?
Here are some of the questions that Neil considers -

Should the company allow the association to pay for Adams expenses?
Who should pay for Adams guest?
Is it permissible for Adam to play golf? Who should pay for it?
Does a conflict of interest exist in this situation?
Does it make a difference if the seminar is held on a weekend instead of
during the week?
Would the situation be different if a vendor sponsored the seminar?
Will there be vendors at the seminar?
Will there be competitors present at the seminar?
Could the information be obtained from another source?
What are Neils responsibilities to his supervisor? To the company?

Next, Neil applies the ethics "quick test."

Neil first considers whether granting Adams request would violate any company
rule or policy. As it turns out, Neils company has a policy that prohibits
employees from accepting gifts from vendors or customers of more than $50 in
value. The policy is silent about gifts from associations, and Neil debates whether
the seminar could be considered a gift or a legitimate industry function. He
concludes that the invitation does not violate any company policy.
Neil then considers whether his decision would negatively impact others. If he
refuses to let Adam attend, Adam may be discouraged, unless Neil can convince
Adam that his decision is reasonable. If he allows Adam to attend, he might
establish a precedent for other managers who receives such invitations. He
concludes that in either case, he can explain it in a way that will not negatively
affect others.
Neil then asks Adam if he would feel obligated by his attendance, which might
affect his objectivity. After talking with Adam, Neil concludes that because the
association is sponsoring and paying for the seminar, and the company is a
voluntary member of the association, Adam will not be obligated to do anything
for the association.
Finally, Neil asks whether Adams attendance could appear improper. He
concludes that by socializing with competitors and vendors, and playing golf with
a guest on a workday, others might conclude that Adams participation is
improper.
Based on the answer to the last question in the ethics "quick test," Neil decides
to talk to his supervisor. Neil also asks Adam to come back to him with some
options they could discuss, including attending only the substantive program,

taking a vacation day for the golf outing, or obtaining the information elsewhere
and forgoing the seminar.
As you can see from the previous example, ethical dilemmas can be complex
and can often cause legitimate disagreements among employees.
IV.

Steps In Decision Making

We have already pointed out that there is no one right way to make an ethical
decision. But all methods do have certain key elements in common, such as -

finding the facts,

asking questions,
thinking through the situation,
making a decision, and
reviewing your decision.

Well discuss each of these elements below.

B.

Finding the facts

One of the key skills in sound ethical decision making is accurately
determining the relevant facts of the situation. Too often, employees
rush to judgment before they have all the facts. This sometimes causes
them to define the problem incorrectly and to overlook key facts.
A fact is an objective piece of information that is relevant to a problem.
Example 24: Bill is a customer service representative for a local cable
company. Bills neighbor Antonio has a new job with an insurance
company, selling homeowners insurance, and is always looking for new
leads. Antonio visits Bills house one night and suggests that they enter
into an arrangement of "neighbor helping neighbor." Antonio asks Bill to
provide him with the names and addresses of new customers seeking to
establish cable service. He tells Bill that Antonios wife, Sylvia, will
provide four hours of free babysitting for Bills young daughter in
exchange for every lead he signs up with homeowners insurance.
Bill knows that Antonio and his wife Sylvia are good, hardworking
neighbors, and he wants to help them out. Many of his cable customers
are new residents moving into the community and could use the name of
a good insurance agent. And he and his wife always had trouble finding
babysitters, particularly at the last minute.
What are the relevant facts in this case for Bill? For his employer?
One approach to fact finding is to list all the facts and then test the
facts by seeing if others would agree with your description of them. Are
there any facts in common on which all parties would agree?
Here are some facts about Bills situation --



Bill has access to customer information.

Bill will receive a benefit if he gives the information to Antonio.

Next, you should see if there are other facts necessary to making a
decision. Some of these facts may apply to the context of the situation,
rather than to the incident itself. For example, here are some additional
issues Bill should consider before making a decision -







C.

Does the company have a policy regarding disclosure of

customer information?
Would the situation be different if Bill didnt receive babysitting
services?
Would the situation be different if Bill received the customers
permission to provide Antonio with information?
Would the situation be different if Bill gave Antonios name to the
customer?

Asking questions
Understanding the facts of a situation usually brings us to the next step
in making an ethical decision. If possible, you should take time to fully
understand the situation. This may involve asking questions,
consulting your supervisor, or rereading the companys code of
conduct. You should postpone taking any action until you fully
understand the situation.
In the previous example, here are some questions Bill might have asked
-

D.

"Antonio, Id like to help you out, but I need to check our

company policy first."
"Antonio, customer confidentiality is an important value of ours. I
doubt that I can do it."
"Antonio, let me think this through and get back to you. It might
be a conflict of interest for me to be using my position and
access to customers to help you, as much as Id like to."

Thinking through the situation

Once you have the relevant facts, you must take the time to think
through all the options and their probable consequences. Here are
some steps to take -

Try to see the situation from every persons perspective.

Step back and look at the "big picture." Is this a limited situation
or one with broader implications?
Consider every alternative, remembering that there are generally
more than two options available. What are the benefits and costs
of each?
Consult others about your view on the choices you have and
possible consequences you may have overlooked. Consider
their opinion and reaction.

In the previous example, if you were Bill, whose interests would you
consider? Antonios? Your employers? The customers? Your own?
Whose interests are most important? What options does Bill have?

E.

Making a decision
The next step is to choose a course of action and then to test it against
questions designed to assist in ethical decision making. Here are some
commonly used ethics questions -

Is it legal?
Is it against company standards?
How would I want to be treated in this situation?
What would someone you respect do?
Would it set a precedent?
Is there a better alternative?
Who else might be impacted?
Would you recommend this decision to others seeking your
advice?
Could you explain your decision to your teenage child or your
mother? To your boss?
If the newspaper reported on your course of action, how would it
look?
If your actions were posted on a message board on the Internet,
available to anyone with a computer, how would you feel?
Does it feel right to you?
What would a reasonable person think?
Could you sleep at night after completing the course of action?

Here are some choices Bill might have made -

Say "no" to Antonio.

Say "yes" to Antonio.
Say "yes" to Antonio but refuse babysitting services.
Ask his supervisor the next day.
Check his company policy about customer information.
Ask his supervisor about giving his customers Antonios name.

Did you see any other options? Which of these seem to be the right
course of action to you and why?
F.

Reviewing your decision

Often, the best way to judge an ethical decision is to see whether it
stands the test of time. After you have made your decision (and, if
appropriate, have communicated it to others) , review it. Were you
satisfied? Would you make the same decision again?
Reviewing your decision involves -

V.

Ethical Action

assessing the decision in hindsight,

reflecting upon what you learned,
making modifications as needed, and
sharing experiences with others.

Ethical behavior involves more than making a decision. It involves acting on it in

a way that will be prudent and successful, which can be difficult, especially in a
business setting. Ethical behavior requires employees to be proactive and to
seek out resources to help themselves and others.
Making the right ethical choice is not necessarily an easy task, particularly if you
are away from your office and have no one to consult. Understanding this, some
companies have been creative about where and how to provide such resources,
taking advantage of technological advances to make as many types of
assistance as possible available to employees.
For example, phone companies have 1-800 helplines available for their
employees to seek rapid assistance. Other companies have established
dedicated ethics web sites, with codes of conduct, discussion about issues,
frequently asked questions, and reports of actual situations employees have
faced.
In addition, mission statements, values statements, codes of business conduct,
policy manuals, and questions and answers are generally good resources to help
you decide what the company wants you to do.
Unfortunately, computers, printed policies, and supervisors might not be
available when you need to make a decision on your own. What do you do in this
situation?
Use your best judgment, following the steps for making a sound ethical
decision, but then continue to ask and seek further assistance even after youve
acted. If youve followed the suggested steps for decision making, in most cases,
youll find that your decision was a good one. However, you may find that you
need to change your decision or take different steps. In any case, you will have
shared information, made partners and learned more about the companys
values.
Often, ethical dilemmas arise and employees have no supervisors or colleagues
to consult. So where can they go for help?
Here are some suggestions -

your companys code of ethics, code of business conduct, or mission

statement,
your supervisor, your supervisors supervisor or another manager,
your companys legal department,
your companys human resources department,
the ethics "quick test,"
the ethics questions weve already discussed that test whether a
proposed decision makes sense or withstands scrutiny,
the steps in ethical decision making,
your companys ethics department, if it has one,
a 1-800 helpline, if available,
an individual you consider an ethical role model, and
professional codes of ethics or industry guidelines.

Lets revisit a previous example --

Georgina is a customer service manager for a local telephone company. She and
her husband are having dinner one night at a local restaurant when Georgina
notices one of her supervisors, Tom, at the bar. A friend joins Tom and the two
move to a nearby table. As time passes, Tom becomes louder, and Georgina can
overhear his conversation. Tom boisterously tells the story of a local real estate
owner who had appealed to the telephone company to give him extra telephone
lines for his apartment building, ahead of others on the waiting list. "And as soon
as I get my next drink, Ill tell you what he offered me in exchange for installing
those lines!" Tom shouts. Georgina is concerned, but doesnt know what to do.
Using the ethics "quick test," ethics questions, and the steps in decision-making,
decide what you would do if you were Georgina.
Here is one course of action - but it is not the only possibility:
Georgina is hesitant about approaching Tom and ultimately decides not to. When
she arrives home, she calls her colleague, Mary, who had recently been honored
as "employee of the year." She relates her story -"Mary, Im not sure whether I should have said something. Obviously, Tom was
on personal time. But he was revealing confidential customer information -- which
Im not sure was true -- in an inappropriate way. What would you have done?"
"I might have tactfully intervened at the restaurant -- maybe," said Mary. "But you
have an obligation to the company to tell someone. Remember that our core
values are honesty, accountability, and responsibility. I think you should call
human resources in the morning and talk over the problem. If this is the kind of
company we think it is and want it to be, then youll be doing the right thing."
VI.

Ethical Leadership
Making ethical decisions is not the only responsibility of employees. Employees
should also strive for the goal of being an ethical leader because one never
knows when he or she is being used as a marker to set someone elses own
ethical compass. By fulfilling other obligations, employees will move toward this
top level of the ethical pyramid -- ethical leadership.
Being a leader doesnt mean having a senior position within the company. Weve
all experienced times when someone we know and respect -- a coworker or team
member -- voices an opinion or leads a group towards a sound decision.
Sometimes, the person sets an example quietly, by consistently doing the right
thing. We naturally turn to that person as a role model or guide whenever we are
thinking through a difficult situation.
Everyone has the capacity for leadership. It starts by being willing to accept basic
ethical responsibilities. Here are several -A.

Learn the policies applicable to work

As we know, compliance with company policies and rules is an integral
part of acting ethically. No matter what area of the company you work in,
certain rules and policies apply to you. If you dont know what they are,
learn where to find them.

B.

Seek assistance from supervisors, other departments, and

sources
Making an ethical decision neednt be a lonely endeavor. Include others
in your conversation and deliberation whenever possible.

C.

Promptly report concerns

Many employees have prevented great harm to their companies and to
themselves by speaking up and questioning situations that concern
them.

D.

Cooperate with investigations and explorations

Sharing information can be one of the most helpful ways to foster an
ethical culture in your company.

E.

Raise questions about things you dont understand

A work climate that encourages candor and discussion is one that makes
ethical decision-making easier.

F.

Promote ethical behavior

Try to achieve your companys objectives by behaving in an ethically
sensitive manner and by encouraging it in others.

G.

Lead by results -- be an ethical role model

By your questioning, encouraging discussion with others, and resolving
ethical dilemmas out in the open, you will be a role model for others.

H.

Use ethical situations as teaching tools for peers and others

Use every opportunity to reinforce ethics by talking about difficult
decisions -- even those you might have made differently and regretted.

I.

Create an ethical culture

All employees have an important role to play in setting the culture of the
organization. Ethical decisions dont happen by accident. They occur
when employees fulfill their ethical responsibility and make a habit of
approaching all decisions with the companys values foremost in their
minds.

VII.

Tell and Listen to Stories

Telling and listening to stories at work can be a valuable resource to find out how
the company expects you to act. Many companies actively seek and encourage
their employees to share information about problems that may raise an ethical

question. By sharing this information and raising questions, you become an

important part of ethical storytelling.
Example 25: David, vice president of operations for Global Utilities, gets a call
from his daughter during a winter storm. "Dad, my power is out. Can you help me
out?" David picks up the phone and calls Sam, manager of GUs storm center.
"Sam, will you get a crew over to my daughters street right away? Her power is
out." Sam replies, "OK, David, well move that street to the top of our list."
Sarah, Davids secretary, overhears the conversation from her desk outside
Davids office. She politely, but firmly tells David that he has just done what he
has told many others they ought not do -- use influence to get special favors
when this is unfair to others. Red-faced, but grateful, David thanks Sarah, calls
Sam back to cancel his request, and calls his daughter to explain.
Rather than keeping this story to himself, David tells it to his direct reports and to
others, emphasizing how grateful he is to Sarah for helping him to avoid an
ethical indiscretion and acting inconsistently with the companies values, as well
as his own. David also believes that the story is a wonderful example of what
GUs culture ought to be -- open, supportive, and value-driven.
Example 26: Global Operations Corp. tells its employees it wants to hear bad
news. The companys "When to Challenge" guidelines are an important part of its
values statement. Employees are told that if they are ever asked to do something
which they believe is either unethical or not in the companys best interest, or if
they become aware of any such activities, it is their right and their responsibility
to express their concerns.

WHY ETHICS IS GOOD FOR BUSINESS

Global communications that make a business scandal in one country headline news in
another have accelerated the current phenomenon of the best companies exchanging
ideas about ethics programs, rather than just concentrating on compliance programs.
Organizations today realize that many of the worlds most successful and admired
companies have made a commitment to ethical business conduct. Others do not want to
be left behind, particularly if they want to become customers, suppliers, or strategic
partners with these global leaders.
There is no doubt that good ethics is good business. Consider a recent review of over
50 studies going back over 25 years, looking at the connections between ethics and
corporate financial performance. Of these studies, 33 showed that corporate ethics
enhanced financial performance.
There are three other reasons why ethics is good for business.
I.

Litigation and Jury Awards

America is a litigious society. As a result, companies and organizations are
vulnerable to criminal, civil, and class action lawsuits. The steady stream of
litigation has one silver lining, however -- it has motivated companies to pay
attention to how they conduct their business practices.

We can all think of huge, prestigious, longstanding, and successful companies

that have been forced out of business or forced to file for bankruptcy, thanks to
products that represent a small percentage of the companys overall sales. A
recent example includes one company that was hit by thousands of claims
alleging injury and illness caused by a product that represented less than 1% of
its sales. Ultimately, a settlement fund of more than $4 billion was not enough to
satisfy these claims.
The most compelling part of many of these stories, however, is that these
companies oftentimes do not lose because they are shown to have manufactured
a dangerous product. The position of many of these companies -- that their
products are not harmful -- is ultimately proven to be correct. However, these
companies often lose in the larger court of public opinion and in the smaller
courts of individual juries, which conclude that they should be punished for acting
unethically and for not sharing information or concerns about their product.
The bottom line is that an ordinary citizens perception of whether a company
acted ethically is critically important. Make it a point for the next week or so to
read the business pages of your local newspaper. Circle stories that seem to
indicate ethical problems -- companies undergoing audits or government
investigations because of financial irregularities or fraudulent practices, top
executives suddenly resigning, or settlements with regulators or other parties for
alleged wrongdoing. Could an emphasis on business ethics have prevented
those stories?
II.

Brand Distinction Through Ethics

Rightly or wrongly, consumers today form impressions about an organizations
brand image from a myriad of impressions they read, see, and hear about the
companys culture.
Many experts now believe that corporate character and customer loyalty are
interconnected. Here are some findings from a recent study on this subject -

"Ethical business practices" ranked second to quality in rating a firms

overall reputation.
"Ethical business practices" ranked second to treatment of employees in
determining where individuals chose to work.
"Ethical business practices" ranked second to service as a reason for
consumer boycott of a particular product or service.
"Best reputation for ethics" is the reason more than 90% of consumers
would choose to do business with a company, if quality, service, and
price were the same among competitors.
39% of investors said they always or frequently check on business
practices, values, and ethics before investing.

Organizations that ignore the impact of consumer perception of their business

practices do so at their peril. The increase in households with Internet access,
the number of web sites that monitor companies, and the proliferation of
information and news outlets all contribute to the fact that ones reputation can be
lost in the blink of an eye.
III.

Employee Loyalty

Recently, evidence has been uncovered that connects ethics with employee
loyalty, an important factor in economic times with worker shortages. Here are
some results from two recent studies -

In companies perceived to be ethical, 55% of employees saw

themselves as loyal, having high commitment and intention to stay.
In companies not perceived as ethical, only 9% of employees rated
themselves as loyal.
In companies with written ethics standards, 58% of employees who
observed misconduct felt an obligation to the company and reported it,
as opposed to 44% in companies without written standards.
In companies with ethics training, 66% reported misconduct, as opposed
to 42% in companies without training.
Only 8% of employees who frequently perceived the value of trust in their
workplace felt pressure to commit misconduct, compared to 51% who
rarely perceived trust.
90% of employees who frequently perceive that trust, honesty, and
respect are applied in their workplaces are satisfied, compared to 35%
who rarely perceive these values.