Institutionalising Ethics

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Institutionalising Ethics

• Leadership and Structure

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INSTITUTIONALISINGETHICS IN CORPORATIONS

• TWO BASIC RULES
• 1. Identify (and state) your rules of operation
  clearly
• 2. Avoid organisational hypocrisy

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UNDER THESE GENERAL RULES CAN BE GROUPED THE
FOLLOWING SPECIFIC RULES

1. Leadership publicly committed to ethics in
   actions as well as words.
2. Develop policies and procedures for addressing
   unethical behaviour.
3. Develop a code of ethics and communicate it to
   staff and public. Use it in decision making and
   ethics training.
4. Institute an ethics office to field ethics
   questions to monitor compliance with ethical
   objectives and employee perceptions and to
   recommend revision of the code, policies and
   procedures.

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Institutionalising ethics 2

• 5. Adequately resource the ethics office.
• 6. Develop ethics training programs.
• 7. Reward ethical behaviour.
• 8. Punish unethical behaviour.
• 9. Do not place employees in competitive
  positions where this can be avoided.
• 10. Do not place individuals under avoidable
  ethical strain group decisions are more likely
  to be ethically safe and transparent than
  individual ones.

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Implications for management

• Successful managers have
• Traits of the head - initiative,
  co-operativeness, flexibility, and coolness under
  pressure.
• At the expense of
• Traits of the heart - honesty, friendliness,
  compassion, generosity, and idealism.
• Michael Maccoby

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Emotional detachment and moral disengagement

• Note the responses of NASA to Challenger, of
  Union Carbide to Bhopal, of Exxon to the Exxon
  Valdez disaster, of Bearings Bank to Nick
  Leesons dealings, of Alan Bond to the Tooheys
  hotel leaseholders, of Jodie Rich to One Tel, of
  Jeffrey Skilling to investors, of Ray Williams to
  HIH, of Gordon Gekko to the world

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Jackall quotes a manager in Moral Mazes

• What is right in the corporation is not what is
  right in a mans home or in his church. What is
  right in the corporation is what the guy above
  you wants from you. Thats what morality is in
  the corporation.

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Jackalls five rules of corporate morality
(survival)

1. Dont go around your boss
2. even if your boss invites dissent, tell him or
   her what he or she wants to hear
3. if the boss wants something dropped, drop it
4. anticipate the bosss wishes - dont force him or
   her to act the boss
5. do not report what the boss does not want
   reported, cover it up and remain silent.

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Goodpasters critique of goal fixation

• He calls the unbalanced pursuit of goals by an
  individual or group teleopathy. This is
• a suspension of on-line moral judgement as a
  practical force in the life of an individual or
  group. It substitutes for the call of conscience
  the call of decision criteria from other sources
  winning the game, achieving the goal, following
  the rules laid down by some framework external to
  ethical reflection.

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Roles again

• No licence to act unethically
• Roles add to responsibilities, they do not exempt
• Suggest that one is impersonating another like an
  actor that the function of the role is what
  matters and the occupant doesnt
• Contribute to lost responsibility in organisations

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Consider the structure of roles in organisations

• Rather than ask What was going on with those
  people to make them act that way?, we ask, What
  was going on in that organization that made
  people act that way?
• James Waters

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Asking this does not relieve individuals of
responsibility

• This question moves the focus to the incentives
  for good behaviour, the disincentives against bad
  behaviour, and the culture of risk or safety,
  retribution or support in which individuals and
  teams act.

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A sick culture exhibits the following features

• 1. There is a "kill the messenger" ethos in the
  organisation - justifies distortion and
  concealment of information.
• 2. There is a low degree of confidence in the
  accuracy of internal reports.
• 3. Despite claims to doing the right thing, in
  the last analysis, top management does the most
  expedient thing.
• 4. Employees do not know of or refer to written
  ethics policies .
• 5. The operative value of the organisation is if
  it's legal it's ethical.
• 6. Top management's stated concern for ethics is
  for public relations.
• 7. Managers while basically truthful are willing
  to deceive in order to accomplish organizational
  or personal goals.
• 8. Managers do not believe there is an obligation
  to be candid where could harm personal or
  organizational goals.
• 9. People who ignore ethics but produce bottom
  line results get promoted.

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How do you discover this?

• An ethics audit.
• An ethics audit is a survey of the members of an
  organization to test their perceptions of the
  health of its ethical culture.
• Building an ethical culture begins with an audit
  of the prevailing culture.

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Take Enrons culture, mirrored in its traders

• Goodpaster, item 5 - The operative value of the
  organisation is if it's legal it's ethical.
• If Californias deregulation was not
  satisfactory, does that entitle Enron and its
  traders to manipulate the market? Is this
  ethical?
• Does legal conduct somehow get transformed into
  ethical conduct by circumstances?
• Does the conduct of the traders show any
  recognition of ethics or the humanity of others
  or of any value beside power and its
  manifestations?

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Reflect on the attitudes of the traders they
show a lot.

• Kevin So the rumours true? Theyre fuckin
  takin all the money back from you guys? All
  those money you guys stole from those poor
  grandmothers in California?
• Bob Yeah, grandma Millie, man. But shes the one
  who couldnt figure out how to fuckin vote on
  the butterfly ballot.
• Kevin Yeah, now she wants her fuckin money back
  for all the power youve charged right up -
  jammed right up her ass for fuckin 250 a
  megawatt hour. Laughter
• These guys were beating up grandmothers, not
  regulators, legislators or legal draftsmen.

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Hans Friedrich was in the SS

• He shot Jewish women and children. When asked
  what he felt when he pulled the tigger, he
  replied nothing. He just concentrated on the
  job of aiming straight.
• This attitude is a problem for anyone seized by
  teleopathy, not just those whose goals are
  intrinsically evil.

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Attending to the psychological contract

• When people join an organization they enter into
  what has been called a "psychological contract" -
  this is the unspoken set of agreements between
  employees and the organisations that employ them.
  
• One writer has argued that "the psychological
  contract may be the central determinant in
  whether a person behaves ethically" (Sims 1991,
  495).
• Hence, the psychological contract can be a
  licence for unethical conduct.

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Leadership

• Studies show that the single most important
  factor in employees adhering to ethical standards
  is example from the top. This is a more potent
  than peer pressure, or background.
• Managers ought to respond to problems identified
  in an ethics audit by making public statements
  about the organization's ethical commitments, the
  ethos it is working to establish and its
  expectations of employees.

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Leadership Means

• Identifying organisational values
• Leaders following these values themselves
• Promoting values to others
• Ensuring values reflected in all actions
  decisions
• Having the courage to insist on ethical conduct

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Leadership means

• authorising and empowering others to behave
  ethically
• modelling ethical behaviour and decision-making
• establishing practices which clearly demonstrate
  a commitment to ethical values and behaviour

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Ethical Empowerment / Ethical Authorisation
Organisation
Top-Level (Department Head, CEO)
trust
responsibility
Next Level (Supervisors, Managers, )
responsibility
trust
Next Levels
responsibility
trust
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Leadership in industry

• If no one leads, no one follows and there will be
  no change.
• Mercedes Benz developed and patented the
  passenger safety cell, but gave it away to other
  manufacturers.
• This is not inconsistent with Benzs culture of
  product development and safety.
• Contrast this with Fords development of the
  Pinto and its attitude to safety issues in the
  name of competition.

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The Pinto

• In 1968 Ford adopted plan for a subcompact on a
  2x2x2 plan (2,000 pounds, 2,000 in 2 years).
• In pre-launch tests, Ford discovered that rear
  end collisions propelled the gas tank onto the
  real axle and unless modified, the car always
  caught fire.
• Ford did not modify the Pinto. Why?

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Fords Cost/Benefit Analysis

• Ford applied a generic cost/benefit analysis to
  all kinds of accident based on National Highway
  Traffic Safety Administration estimates of the
  worth of a human life around 200,00 and its
  own figures on deaths from car accidents. The
  analysis is as follows

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• Future productivity losses
• Direct 132,000
• Indirect 41,000
• Medical Costs - Hospital 700 Other 425
• Property Damages 1,500
• Insurance administration 4,700
• Legal and court expenses 3,000
• Employer losses 1,000
• Victim's pain and suffering 10,000
• Funeral 900
• Assets (lost consumption)5,000
• Miscellaneous accident costs 200
•  
• Total per fatality 200,725

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• Benefits
• 180 burn death, 180 serious burn injuries, 2,100
  burned vehicles
• Unit cost 200,000 per death, 67,000 per
  injury, 700 per vehicle
• Total Benefit (180 x 200,000) (180 x 67,000)
  (2,100 x 700) 49.5 mil.
•  Costs
• Sales 11 million cars, 1.5 million light trucks
• Unit cost 11 per car, 11 per truck
• Total cost 12.5 million x 11 137.5 million

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• On this analysis, Ford decided not to modify the
  Pinto chassis.
• In 1978 in Indiana, a Ford Pinto with three young
  women aboard was struck in the rear and all three
  burned to death. This was only one of a number of
  such incidents, but Ford was indicted this time.
• The judge instructed the jury that Ford would be
  guilty of wrongful death if it could be shown to
  have been indifferent to the dangers of the
  Pinto.
• Ford was acquitted.

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Moral analysis

• Did the end justify the means?
• Was Fords price of a human life defensible?
• Was Fords cost benefit analysis conducted
  ethically?

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Law and regulation

• Lobby for a regulatory environment appropriate to
  the times. A good company dont have to be
  ethical alone and lose competitive advantage
  because it is ethical.
• Self-regulate and be firm about it. Codes are
  only one form of this. Policies and procedures
  complement ethical directives and exhortations.

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CODES

• Rule of law
• Common floor
• State fundamental values
• Can be codes of conduct or ethics or hybrid
• Must be used frequently to be effective
• Should be part of induction and development
• Must cover whole organisation
• Can be developed at top

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Code of Ethics Code of Conduct

• general
• values / principles
• judgment
• empowering
• aspirational

• specific
• prescriptions / directives
• uniformity
• enforceable statement of something specific

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Use examples

• Reward good behaviour and never punish it, even
  if brings problems - Sherron Watkins Cynthia
  Cooper.
• Recognise good conduct and use it in staff
  training.
• Punish poor behaviour and never reward it, even
  if it brings results - Enron.
• Use examples of ethical failure in training, but
  balance them with examples of excellence.

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An aid to clarityDecision models

• Do NOT make the decision for you
• Document the decision and the process
• Make plain what values are sacrificed
• Aid in moral reasoning
• Objectify moral reasoning and allow an example to
  be set

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LAURA NASHS MODEL OF ETHICAL DECISION MAKING

• Have you defined the problem accurately?
• How would you define the problem if you stood on
  the other side of the fence?
• How did this situation occur in the first place?
• To whom and to what do you give your loyalty as
  a person and as a member of the organisation?
• What is your intention in making this decision?

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6. How does this intention compare with the
probable results?7. Whom could your decision or
action injure?8. Can you discuss the problem
with the affected parties before you make your
decision?9. Are you confident that your position
will be as valid over a long period of time as it
seems now?10. Could you disclose without qualm
your decision or action to your boss, your CEO,
your family, society as a whole?11. What is the
symbolic potential of your action if understood?
If misunderstood?12. Under what conditions would
you allow exceptions to your stand?Laura Nash,
Ethics without the sermon, Harvard Business
Review, 59, 1981, 79-90.
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Summary of what is to be done

• Codes Leadership mentoring
• Ethics training Incentives and
  disincentives
• Ethics officers Hotlines
• Committees Ombudsman
• Newsletters Performance standards
• These all support a culture of ethical excellence

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Whistleblowing a last resort

• Public exposure of a danger to public interest
• Permitted when a serious issue is not addressed
  within an organisation
• Not internal
• Involves a betrayal of kinds
• Is a costly remedy
• Motives of whistleblower not central
• Difficult to legislate protection for

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External support for whistleblowing difficult

• Protected disclosures in Australasia have not
  resulted in more than a handful of charges and no
  successful prosecutions.
• General distrust of whistleblowers despite
  legislated protection.
• Whistleblowers associations can be unhelpful.

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Criteria for legitimate whistleblowing

• There is an immediate and serious issue of public
  concern.