Importance of Ethics in

Organizational Behavior
Jawad Bashir L11-5206
Asad Illyas L11-5218
Ahmed Rabbani L11-5285
Objectives
Organizational
Organizational Behavior
Ethics
Why its important in organizations
Importance of leadership and culture
Organizational challenges and safeguards

2
What is an Organization?
An organization is a
collection of people
who work together
to achieve individual
and organizational
goals.
3
What is Organizational Behavior?
Organizational
behavior (OB) is the
study of factors that
affect how individuals
and groups act in
organizations and how
organizations manage
their environments.
Ethics

A concept of right and wrong conduct
beyond legal compliance
Ethical principles are implicit contracts that
represent who you are and what you stand
forwhat your constituents expect to rely on
Michigan Business School Guide to The Ethical Challenge,
How to Lead with Unyielding Integrity

Why is Ethics Important in
Organizations?
Attendance
Safety
Quality
Productivity
Loyalty
Security
Profitability
Character and ethical behavior in
organizations affects:
Why Should Organizations Behave Ethically?
Prevent harm to others, avoid
reputational harm and reduce
potential liability
Fulfill public expectations and
improve external relations
Protect organization from others
(employees, competitors, etc.)
Improve workforce productivity
but protect employees if needed
from their employers
Promote personal morality

Reasons for Ethical Problems in Organizations
Personal Gain and Selfish Interest

Competitive Pressure on Finances

Organizational Goals vs. Personal Values


Organizational Safeguards
Leadership/Open door policy
Ethics officer
Ethics committee
Code of conduct
Discussion forums
Conflict of interest assessments
Periodic risk assessments
Ethics and compliance training
Help line
Recognition effort
Corporate citizenship
Best Practices
Impact of the Individual
Leader/Manager
The behavior and ethical attitude
of an employees boss
is seen as the most important factor
determining whether the
employee will behave unethically on the job
(Liebig, J.E. 1990)

PNM Resources
Do the Right Thing: Principles of Business Conduct
Ethics & Compliance Staff and Volunteers
Risk Assessment
Continuing Education
Integrity Line
Integrity in Action Awards
Community Leadership
New Mexico ethics consortium
Corporate Ethics & Compliance Program
New Mexico Ethics Consortium
Mission
Seek to make New Mexico a better place to live
and do business by creating and sustaining
ethical business cultures within New Mexico
communities, businesses, organizations and
governments

HOW?
New Mexico Ethics Consortium
Guiding Principles

Community includes all organizations
Dont reinvent the wheel
Complement vs. compete
Organizational vs. functional ethics
Cannot buy in
Sustainable business model
Partnership/membership
Services for fees
New Mexico Ethics Consortium
Implementation
Standards
Education
Resources
Thought for the Day
All that is necessary for the
triumph of evil is that good
men [people] do nothing.

Edmund Burke
Irish orator, philosopher, &
politician (1729 - 1797)

Copyright 2002 by South-
Western
316
The Nature of Managerial Ethics
Ethics
The set of standards and code of conduct that
defines what is right, wrong, and just in human
actions.
Sources of ethics
Socializationthe process through which people
develop beliefs (social values, norms, and mores)
about what is right, wrong, and just.
Organizations teaching ethics: religious, educational,
cultural, and family.
Copyright 2002 by South-
Western
317
Moral Development Models
Ethic of care
An act is judged as ethical depending on whether
the act derives from feelings, emotions, and
empathy for others.
Ethic of justice
Abstract rules (personal
moral principles) are used
to define which actions are
fair and which actions are
not.
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Western
318
Managerial Ethics
Managerial ethics and responsibilities
The application of personal ethics within the
context of the management of organizations.
Ethical responsibilities:
Personal decisions and actions
Actions taken at the direction of superior
Actions taken by subordinates following orders
Inaction that allows unethical behavior to occur
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Western
319
An Organizations Ethical Responsibility
Top managements responsibilities
Infuse ethical behavior into the organizational
culture.
Provide role models for ethical behavior.
Punish unethical behavior when it occurs.
Make explicit statements of what ethical conduct
is.
Establish a ethical code of conduct.
Encourage the reporting of unethical conduct
(whistleblowing) and protect those who report it.
Copyright 2002 by South-
Western
320
The Impact of Reward and Punishment on Unethical
Behavior
Unethical
behavior
punished
Unethical behavior
rewarded and
punished
Unethical behavior
neither rewarded
nor punished
Unethical
behavior
rewarded
Mostly
ethical
Mostly
unethical
Behavior
M
a
n
a
g
e
r
i
a
l

R
e
s
p
o
n
s
e

t
o

B
e
h
a
v
i
o
r

FIGURE 36
Source: W. H. Hegarty and H. P. Sims, Jr. 1979. Organizational philosophy, policies, and objectives related to unethical
decision behavior: a laboratory experiment. Journal of Applied Psychology 64:331338.
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Western
321
Theories Affecting Ethical Standards
Utilitarian theory
An action is considered morally right if its
consequences for everyone affected by the action are
greater than those which would be realized by a
different action.
Rights theory
Decision makers paramount concern is respecting the
moral and/or legal rights to which people are entitled.
Procedural justice is applied to ensure that, while all
individual outcomes may not be equal, the process of
outcome allocation is perceived as fair and impartial.
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Western
322
Ethical Dilemmas
Ethical dilemmas
Situations that arise when managers attempt to
balance the utilitarian (future-oriented) ethic and
the formalistic (perpetuating rights and the status
quo) ethic.
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Western
323
Encouraging Ethical Behavior
Encourage ethical behavior in short-term by:
Hiring persons who are not prone to unethical
behavior.
Making public statements (e.g., a code of ethics)
about the importance of ethical behavior.
Developing policies that specify ethical objectives.
Rewarding ethical behavior; punishing unethical
behavior.
Avoiding competitive situations where there is a
potential for unethical behavior.
Using groups to make decisions requiring moral
judgment.
Copyright 2002 by South-
Western
324



The Interactionist
Model of Ethical
Decision Making
in Organizations





Ethical
Dilemma
Cognitions
Stage of
Cognitive Moral
Development
Ethical/
Unethical
Behavior
SITUATIONAL FORCES
Immediate Job Context
Reinforcement
Job Pressures
Organizational Culture
Responsibility for
Consequences
Characteristics of the Work
Role Taking
Resolution of Moral Conflict
Individual Belief Systems
Locus of Control
FIGURE 37
Source: Modified from L. K. Trevino. 1986. Ethical Decision
Making in Organizations: A Person-Situation Interactionist
Model. Academy of Management Review 11:603.
Copyright 2002 by South-
Western
325
DiversityA Contemporary Issue of
Ethics and Social Responsibility
Organizational diversity
The goal of having a heterogeneous work group
where no one group occupies a majority
position, and all members are expected to work
effectively with people different from
themselves.
Why value diversity?
Diversity is ethical.
Diversity is socially responsible.
Diversity is good business (competitive
advantage).
Definition of the
Managing Ethics Competency
Involves the ability to incorporate values and
principles that distinguish right from wrong in
making decisions and choosing behaviors
Ethics
Definition: Values and principles that distinguish right from
wrong. NOT IN TEXT: Ethics are often based upon laws,
organizational policies, social norms, family, religion, and/or
personal needs, and may be subject to differing interpretations
with problems in proving truth
Ethical Dilemma*: A situation in which an individual or
team must make a decision that involves multiple values.

Core Abilities of the
Managing Ethics Competency
Identify and describe the principles of ethical decision
making and behavior
Assess the importance of ethical issues in actions
Apply laws, regulations, and organizational rules in
making decisions and taking action
Demonstrate dignity and respect for others
Demonstrate honest and open communication limited only
by legal, privacy, and competitive considerations
Definition of the
Managing Across Cultures Competency
Involves the ability to recognize and embrace
similarities and differences among nations and
cultures and then approach key organizational and
strategic issues with an open and curious mind
Culture = the dominant pattern of living, thinking, and
believing that is developed and transmitted by people,
consciously or unconsciously, to subsequent generations
Cultural values = those consciously and subconsciously
deeply held beliefs that specify general preferences,
behaviors, and define what is right and wrong.
Core Abilities of the
Managing Across Cultures Competency
Understand, appreciate, and use cultural factors that can
affect behavior
Appreciate the influence of work-related values on
decisions, preferences, and practices
Understand and motivate employees with different values
and attitudes
Communicate in the local language
Deal effectively with extreme conditions in foreign
countries
Utilize a global mindset (use a worldwide perspective to
constantly assess threats or opportunities)
A Model of Ethical Behavior in the
Workplace
Cultural Influences
Family
Education
Religion
Media/entertainment
Organizational Influences
Ethical codes
Organizational culture
Role models (age military, teams)
Perceived pressure for results
Rewards/punishment system
Individual
- Personality
- Values
- Moral
principles
- History of
reinforcement
- Gender
Political/Legal/
Economic
Influences
Ethical
behavior
Copyright

The McGraw-Hill Companies, Inc. 2003 Permission required for reproduction or display

A-1
Figure A-1
McGraw-Hill 2004 The McGraw-Hill Companies, Inc. All rights reserved.
What does research show about the
effects of gender?
Men:
Justice Perspective
based on the ideal of
reciprocal rights and driven by
rules and regulations
Women:
Care Perspective involves
compassion and an ideal of
attention and response to need
Men and Women view moral problems
and situations differently
A-2

McGraw-Hill 2004 The McGraw-Hill Companies, Inc. All rights reserved.
General Moral Principles
Dignity of human life
Autonomy
Honesty
Loyalty
Fairness
Humaneness
The common good
A-3
Table A-1
McGraw-Hill 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Improving On-the-Job Ethics
Behave ethically yourself
Screen potential
employees
Develop a Meaningful
Code of Ethics
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McGraw-Hill 2004 The McGraw-Hill Companies, Inc. All rights reserved.