Why good managers make bad ethical choices?

Chapter 1

Introduction

Incorporating values and ethics into Business decisions have become increasingly important. Business schools are ensuring that students graduate with a knowledge of ethical principles and the critical thinking skills necessary to analyze and make sound ethical decisions.

[Type text]

Page | 1

Why good managers make bad ethical choices?

Chapter 2

Business Ethics

Society generally feels that there are certain values that should be set as the minimum ethical behavior. To meet the minimum ethical standards, a business must be honest, obey the law, and not directly infringe on the rights that our society holds as inalienable human rights. Some of the Ethical issues involve compensation of employees, job security for employees, hiring practices, waste management issues, pollution, and conflicts of interest.

[Type text]

Page | 2

Why good managers make bad ethical choices?

Chapter 3

Morality & Profitability

Morality means Moral Discipline Concerned with principles of right and wrong or conforming to standards of behavior & character aligned with the principles of right and wrong Profitability - generally is the making of gain in business activity for the benefit of the owners of the business

[Type text]

Page | 3

Why good managers make bad ethical choices?

Chapter 3.1

Role of morality & profitability

We are in the business of preserving & improving human life. All of our actions must be measured by our success in achieving this goal MERCK & COMPANY Putting profits after people & products was magical at Ford Don Petersen, Former CEO, Ford, 1994 Sequence of three Ps People, products and profits in this order Don Petersen, CEO, Ford.

[Type text]

Page | 4

Why good managers make bad ethical choices?

Chapter 4

Ethical Profitability

The balance between profits and ethics is term as Ethical Profitability. Example: Enron Fallout Many investors are paying closer attention to a company's ethics, as well as their profits. These investors realize that a corporate focus on profits alonewith little regard to ethical standards, conduct and enforcement may result in short-term revenue gain, but long-term profitability may be limited. In cases like Enron, long-term viability is limited too.

[Type text]

Page | 5

Why good managers make bad ethical choices?

Chapter 5

5 Key areas of ethical profitability

Ethical Profitability Well-balanced companies not only consistently reward owners, investors and employees with profitable performance; they also genuinely focus on these five key areas:
1. Leadership by example:

To manage well is to lead employees effectively, ethically and without arrogance. Company owners, executives and managers must set the highest examples of attitude and conduct for their employees. 2. Company-wide ethical awareness: Employee when not at work, practice personal ethics in areas such as caring for others, being kind and honest, and not harming others. Do these same people, when they arrive at work, maintain their personal guidelines? In-the-office ethical behavior includes demonstrating trustworthiness to managers and coworkers, respecting privacy and avoiding conflicts of interest. Ethics knows no time clock.
3. Strong management of revenue generation and reporting :

Corporate temptation to stretch ethical behavior in revenue generation and reporting is universal. To overcome these temptations, revenuerelated managers must establish and maintain a firm stance on ethical marketing, advertising, selling and reporting. This requires regular dissemination and enforcement of codes of conduct.

[Type text]

Page | 6

Why good managers make bad ethical choices?

4. High level of internal trust: The level of trust within a company should reflect the level of trust the company solicits from customers. If customers are encouraged to put their complete trust in the product or service, then company teams must do the same with each other. An increase in trust is a reduction in risk and uncertainty, which in turn will keep the revenue generation process flowing smoothly.
5. Formal and active compliance program:

An organizational ethics doctrine does have legal benefits. Properly written, published and disseminated ethical codes will reduce corporate risk if an employee creates a criminal or civil problem because of poor ethical behavior. The true test of ethical profitability is whether or not the company is a positive example to its employees, to its customers and even to other companies. Such companies practice the truest form of leadership-by-example. They reach for a higher bar

[Type text]

Page | 7

Why good managers make bad ethical choices?

Chapter Seven

Business Ethics

Business ethics defined as written and unwritten codes of principles and values that govern decisions and actions within a company. Business ethics can be used to describe the actions of individuals within an organization, as well as the organization as a whole. The organizations culture sets standards for determining the difference between good and bad decision making and behavior.

[Type text]

Page | 8

Why good managers make bad ethical choices?

Chapter Eight

Importance of Ethical Business Decisions

Co. who wishes to thrive long-term must adopt sound ethical decision-making practices. Co. who behaves in a socially responsible manner is much more likely to enjoy ultimate success than those whose actions are motivated solely by profits.

Co. knowing the difference between right and wrong and choosing what is right is the foundation for ethical decision making. Doing the right thing often leads to the greatest financial, social, and personal rewards in the long run. Factors Impacting Business Ethics Corporate culture Existence and application of a written code of ethics Formal and informal policies and rules Norms for acceptable behavior Financial reward system System for recognizing accomplishment Company attitude toward employees How employees are selected for promotions Hiring practices Applications of legal behavior Degree to which professionalism is emphasized The companys decision making processes Behaviors and attitudes of the organizations leaders

[Type text]

Page | 9

Why good managers make bad ethical choices?

Chapter Nine

10 Qualities for Good Managers

1. To choose a field thoughtfully

2. To be a good mediocre
3. To create productive environment

4. To define success 5. To be a good communicator 6. To transfer the skills 7. To build morale 8. To solve the challenges 9. To be sound mind 10.To be a risk taker & solve r at times

[Type text]

Page | 10

Why good managers make bad ethical choices?

Chapter Ten

Why do managers make unethical decisions?

Determinants:

1. Personal Ethics Generally accepted principles of right and wrong governing the conduct of individuals: Our personal ethical code exerts a profound influence on the way we behave as businesspeople The first step to establishing a strong sense of business ethics is for a society to emphasize strong personal ethics

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics 2. Decision-Making Processes Several studies of unethical behavior in business have concluded that businesspeople sometimes do not realize they are behaving unethically primarily because they simple fail to ask. . Is this decision or action ethical?

[Type text]

Page | 11

Why good managers make bad ethical choices? Often the result of applying straight-forward business calculus to a decision without considering important ethical issues 3. Leadership

4. Organization Culture The climate in some businesses does not encourage people to think through the ethical consequences of business decisions Result of an organizational culture that deemphasizes business ethics, reducing all decisions to be purely economic Corporate culture refers to any set of values, norms, rituals, formal rules, and physical artifacts that exists in a company.

5. Unrealistic Performance Expectations Pressure from the parent company to meet unrealistic goals that can only be attained by cutting corners or acting in an unethical manner This often results in managers will violating their own personal ethics and engages in unethical behavior An organizational culture with values that reinforce ethical behavior is an essential ethical component

[Type text]

Page | 12

Why good managers make bad ethical choices?

Chapter Eleven

Co-existence of Morality & Profitability Ideology

Companies having an ideal blend of Morality & Profitability are visionary companies with strong ideology (ideals) Ideology set of basic precepts or beliefs or values that are subscribed to Core Ideology exists in these companies not just as words but as a vital shaping force Combining both Genius of the AND ideology AND profits These companies do pursue profits or long term shareholder wealth but they also pursue meaningful ideals of serving humanity. Managerial Teasers
1. You are in-charge of cash expenses Your supervisor comes and

asks you for a cheque of Rs. 3000 towards expenses he incurred entertaining a client last night. At lunch your supervisors girlfriend stops by to pick him up for lunch and you overhear her telling the receptionist what a great time she had at dinner with your supervisor the night before
2. You are the HR manager in your company Your Company has a

firm policy regarding cases of theft of company property. Used company equipment is sold in a bid each month. You see a valued employee who is 5 months away from retirement, slip an electric drill and put it in his car.

[Type text]

Page | 13

Why good managers make bad ethical choices?

3. You are the buyer for a retail clothing store. Your store has a policy of not accepting gifts. However, over the years, salesmen have offered and other employees have accepted lunch, theater and sporting event tickets. You arrive home from office one evening and find a new LCD and DVD player at your doorstep with a note that says A personal gift for long lasting friendship The Divikar Clothing Company
4. You are a bank teller working for the bank for the past 6 months,

one of the other tellers at the bank who has become a good friend tells you that her daughter is extremely ill and has to be operated at an expense of Rs. 9 lakh rupees. Some days later you ask about her daughters health and she tells you that her daughter is just fine now. She then confides in you and says she took the money from a dormant account at the bank to pay for the operation. She assures you she has started paying it back and will return the entire amount into the account in some time.

What do you do.?

[Type text]

Page | 14

Why good managers make bad ethical choices?

Chapter Twelve

Hewlett Packard & Texas Instruments

Hewlett Packard ideology

David Packard Founder Partner Profit is not the proper end & aim of management but it is what makes all of the proper ends and aims possible Packard Became public in 1957 Initiated an Management development programmed central to the long term health of the organization

Core Values - Hewlett Packard

Company is group of people coming together to exist as an institution Purpose is to accomplish something collectively in order to make a contribution to society

Contribution to make a product or provide service to do something which is of value to the society Design, develop & manufacture finest electronic equipment for advancement of science and welfare of humanity Profit was one of the important objective But Profit was seen as means to pursue the broader aims of developing better technology for the welfare of the society HPs focus was to provide real satisfaction to customers and be judged by them Bigger Growth was ONLY WITHIN the context of making a contribution

[Type text]

Page | 15

Why good managers make bad ethical choices?

Texas Instruments

Texas Instruments defined itself exclusively in terms of size, growth & profitability Focus was to grow from a good little company to good BIG Company Pat Haggarty, President Corporate ideology & goals was solely on financial growth Focus on growth even if products were low quality or made no technical contribution

[Type text]

Page | 16

Why good managers make bad ethical choices?

Chapter Thirteen

CASE STUDIES

CASE STUDY - 1 Johnson & Johnson versus Bristol Myers

Core values Johnson & Johnson

Emphasize is on ideals beyond profit Founded by Robert Johnson in 1886 with the aim to alleviate pain & disease Business ideology placed service to customers & concern for employees ahead of returns to shareholders. Only when service to customers, employees & management have been done then the stockholders should receive a FAIR return

J & J CREDO

J & J ideology was codified in the credo printed on old style parchment The essential ideology Hierarchy of responsibilities descends from Customers to Employees to Management and then to Shareholders Emphasis on FAIR return rather than MAXIMUM return to the company and the shareholders Credo is the link to any Key Decisions

[Type text]

Page | 17

Why good managers make bad ethical choices?

J & J translating credo into Action

1982 Tylenol crisis Tylenol bottles distributed in Chicago laced with cyanide (not by any employee) Result Death of 7 people J & J used the credo as the basis for its response J & J removed all Tylenol bottles from the entire US market and not just from Chicago Mounted an intensive communication effort to alert the Public and deal with the problem At a estimated cost of $100 million above efforts J & J portrayed itself as a company willing to do whats right, regardless of cost

[Type text]

Page | 18

Why good managers make bad ethical choices?

Bristol Myers

Bristol Myers Pledge only on paper and not on practice No Link between their Pledge and core business practices Focus is more on Profits and earnings and savings on cost Faced an identical problem as faced by J & J Excedrin tablets were found to be tampered with in DENVER area in the state of Colorado Bristol Myers recalled tablets only from the Colorado state and not from the entire US Did not launch any campaign to alert the Public Focus was more on minimizing losses to the company

[Type text]

Page | 19

Why good managers make bad ethical choices?

CASE STUDY - 2 MERCK & Company versus Pfizer

Merck Ideology & Values

We are workers in industry who are genuinely inspired by the ideals of advancement of medical science & service to Humanity George Merck II, 1935

Our Business success MEANS victory against disease and help to humankind P. Roy Vagelos, 1991 Core ideal was to preserve and improve human life These above ideals were translated into action when manufacturing a drug to cure River Blindness

Merck -Translating Values into Action

River Blindness a disease that infected a million people in Africa & Latin America with parasitic worms that caused discoloring of skin, intense itching & painful blindness

Huge market but no revenue - Million customers who could not afford the product Merck still went ahead with their R & D and manufactured the drug MECTIZAN hoping that some government or any third parties would purchase & distribute the products once available

But the Governments themselves did not have the finance nor did any third parties come forward Merck elected to give the drug away free It also involved itself directly in its distribution efforts
Page | 20

[Type text]

Why good managers make bad ethical choices?

Why? Failure to go ahead with MECTIZAN would have demoralized their scientists and would have gone against their core value of preserving & improving human life

Long term benefit for the company in the form of goodwill which somehow always....pay off Merck belief Medicine is for the patient, for the people & not for profits.

Pfizer

Core belief to make profit out of everything we do John McKeen, President Instead of spending Cash on R & D like Merck, Pfizer went on acquisition drive Acquiring 14 companies & diversifying into farm products, shaving products, etc. Focus was on making more money regardless of line of Business

[Type text]

Page | 21